Congressional Oversight: FAA Case Study Shows How Agency Performance, Budgeting, and Financial Information Could Enhance Oversight
Published: 2006-03-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Pursuant to various statutes, federal agencies develop an abundance of performance, budget, and financial information that could be useful for Congress' review and monitoring of agencies. However, agencies' understanding of Congress' information needs is often limited and agencies may not be providing timely information in a format that aids congressional understanding of trends and issues. Thus, Members and their staff may not be aware of or avail themselves to certain information. To describe the information available and how it might be used to support congressional oversight, the Federal Aviation Administration was selected as a case study in part due to the large quantity of information already available. GAO was asked to identify: (1) information FAA produces that could enhance congressional oversight, (2) other technology and information resources that could enhance congressional oversight, and (3) how committee access to FAA's information could be improved to enhance its timeliness and usefulness.
section_title: What GAO Found
paragraphs: The Federal Aviation Administration (FAA) has made available much of the information and analytic resources that Congress needs to carry out its oversight function. For example, FAA has a strategic plan with long-term, outcome-oriented goals and objectives. Its annual Performance and Accountability Report includes the agency's progress in achieving its goals, and allows Congress to monitor performance trends. This report also provides financial information useful for analyzing its operating results and financial position. FAA's budget documents combined with performance data could provide Congress information to use in determining whether resources are achieving the planned performance improvements. Used together, this information could assist Members of Congress and congressional staff in their oversight responsibilities. Through its legislative support agencies--GAO, Congressional Research Service and the Congressional Budget Office--and the Department of Transportation's (DOT) Inspector General (IG), congressional committee staff also have access to considerable resources for oversight. For example, GAO's 2005 High Risk Series Update includes FAA's Air Traffic Control Modernization program and discusses progress the agency has made in addressing its problems. DOT's IG annually reports on the top management challenges facing FAA, such as safety and capacity challenges. Effective communication is needed to ensure that information agencies provide meets congressional needs. While considerable information resources are available, they may not be available in a manner that is useful to committees. We have reported that although agencies collect and produce a great deal of information, much of it did not reach the interested committees, and the information that did reach them was difficult to digest, highly aggregated, or was received too late to be useful. In the case of FAA, House Transportation and Infrastructure Committee staff said FAA has a large quantity of information available and effective communication between the staff and agency, but is interested in using technology to gain additional agency data. While FAA provides a great deal of information on its Web site, it could take additional advantage of technology to improve the timeliness and usefulness of information to the Congress. For example, a Frequently Asked Questions section could provide quick access to information often requested by committees. As a result of our discussions with committee and agency staff, FAA has initiated two suggested technology enhancements, a For Congress page on its Web site, providing a single point of access for information relevant for oversight, and a Web site subscription service notifying committee staff when relevant information has been updated on its Web site. Further, regular meetings between congressional committees and agency officials could identify the committee's oversight objectives, provide a forum to discuss the issues, and develop approaches to meet them. Importantly, these findings constitute lessons learned that may be transferable to other agencies.

section_title: Letter
paragraphs: In your letter dated September 13, 2004, you noted that federal agencies  develop an abundance of performance, budget, and financial information  for internal use as well as to report to Congress for oversight purposes.  However, Congress may not be fully aware of or availing itself of this  information. Further, communication between agencies and Congress to  clarify Congress’ information needs is limited. For example, you stated that  agencies often do not provide information in a timely manner or in a format  that facilitates understanding of trends and issues, making it difficult to  synthesize and use the information to identify areas of greatest concern  and conduct effective oversight. As a result, you stated that too often  oversight occurs in an ad hoc manner as problems arise, and with  inadequate information to determine and address root causes. Further, as  government grows more complex, and agencies produce more information,  it becomes harder for Congress to access, analyze, and summarize this  information to develop its policy positions and legislative enactments. New  ways must be continually found to use emerging technology and  approaches to make agency information transparent and readily available.
You requested that we help to address these issues by working with  committee staff to develop a framework for establishing timely and  constructive oversight of programs under the committee’s jurisdiction. To  establish a working precedent, the Federal Aviation Administration (FAA)  was selected as a case study as a result of its large quantity of information  already available, the forward-looking management systems being  developed, and the effective communications between the staff and agency.  Our objectives were to identify: (1) information FAA produces that could  enhance congressional oversight, (2) other available information resources  that could enhance congressional oversight and, (3) how committee access  to FAA’s information could be improved to enhance its timeliness and  usefulness.
To achieve our objectives, we worked with members of your committee’s  oversight staff, as well as Aviation Subcommittee staff to better understand  their information needs and delivery mechanisms. In addition, we  identified relevant FAA performance, budget, and financial documents and  met with senior officials from across FAA, including several lines of  business—Airports, Air Traffic Organization, Aviation Safety—and staff  offices—Aviation Policy, Planning and Environment, Financial Services,  Government and Industry Affairs, Human Resources and Management. We  also met with officials from the Department of Transportation’s (DOT)  Office of Inspector General (OIG), the DOT’s Chief Information Officer, the  Congressional Research Service, the General Service Administration’s  FirstGov initiative, and the Office of Management and Budget, as well as  representatives from several think tanks. Our review was conducted from  September 2004 through December 2005 in accordance with generally  accepted government auditing standards.
subsections: section_title: Agency Performance, Budget, and Financial Management Documents Can Enhance Oversight Efforts
paragraphs: Congressional oversight is the review, monitoring, and supervision of  federal agencies, programs and policy implementation. This oversight  provides the legislative branch with an opportunity to inspect, examine,  review and check the executive branch and its agencies. Congressional  oversight includes two different features—that which is ongoing  throughout the course of a year and that which is done at a specific time in  the year in response to the issuance of the President’s budget. For the  latter, House and Senate committees with jurisdiction over federal  programs are required to submit a views and estimates report—a report  containing the committee’s comments or recommendations on budgetary  matters within its jurisdiction—to its respective budget committees each  year within 6 weeks of the submission of the President’s budget. For  example, the House Transportation and Infrastructure Committee’s fiscal  year 2006 views and estimates report identified a number of aviation- related issues and recommended increased funding over the President’s  proposed budget for facilities and equipment to pay for capital  improvements designed to increase capacity and reduce aviation gridlock  and for airport safety upgrades, including explosive detection systems for  airport baggage systems. Ongoing oversight and the specific views and  estimates oversight reports can draw information from documents and  reports issued by federal departments over the course of the year.
Pursuant to the Government Performance and Results Act of 1993 (GPRA)  and other statutes, federal agencies produce performance, budget, and  financial information for internal management purposes and for reporting  to Congress which can also be useful to congressional committees to  enhance their oversight efforts. GPRA required federal agencies to develop  strategic plans with long-term, outcome-oriented goals and objectives,  annual goals linked to achieving the long-term goals, and annual reports on  the results achieved. The Chief Financial Officers Act of 1990 (CFO) as  expanded by the Government Management and Reform Act of 1994  (GMRA) requires annual audited agencywide statements for 24 major  federal departments. In the case of FAA, the agency has made available  much of the information and analytic resources that Congress needs to  conduct its oversight role.
As part of DOT, FAA addresses some of the requirements of GPRA through  its inclusion in DOT’s Performance and Accountability Report. However,  FAA also produces its own strategic plan, unit-specific business plans and  performance reports that identify agency priorities, goals, strategies and  progress toward these goals and the success of the strategies employed.  Collectively, these documents help Congress determine whether FAA’s  goals are aligned with congressional goals and whether FAA is achieving  them. Linking performance information to FAA’s budgetary resources, such  as FAA is beginning to do in its performance-based budget, can also  provide Congress the opportunity to oversee the results planned or  achieved with budgeted resources and indicate FAA’s priorities for funding.  Used together, these agency documents could assist committees in  identifying and tracking progress on the issues related to reauthorization  and oversight.
subsections: section_title: FAA’s Strategic and Performance Reporting Documents Outline Agency Goals and Priorities
paragraphs: FAA manages performance through a series of integrated performance  documents. FAA’s principal performance reports are: the strategic plan,  called the Flight Plan; unit specific business plans; the annual Performance  Accountability Report; and quarterly performance reports. The Flight Plan  includes the agency’s mission, goals and strategies. In addition, each of  FAA’s lines of business has a unit-specific business plan that outlines how  its actions will support the goals and measures identified in the Flight Plan.  FAA monitors and reports on the Flight Plan’s key performance targets  through quarterly and annual performance reports.
subsections: section_title: FAA’s Strategic Plan
paragraphs: FAA’s current 5-year strategic plan, or Flight Plan, is designed to outline the  agency’s mission, goals and strategies to achieve these goals through 2009,  with the overall aim of seeking “to provide the safest, most efficient  aerospace system in the world.” Among other things, GPRA requires  agencies to consult with Congress and solicit the input of others as they  develop these plans—a good opportunity for congressional committees  and staff to influence FAA’s future. According to FAA senior executives, the  Flight Plan is the primary document that identifies the agency’s priorities  and performance expectations and is the driver of decision making at all  levels. As such, the Flight Plan is key for internal agency and congressional  oversight purposes. Committees can refer to the plan to determine whether  national priorities are appropriately recognized and to raise questions  about whether the strategies laid out are likely to lead to success. The  Flight Plan identifies four strategic goals (see table 1), each of which are  supported by objectives, strategies, initiatives, and performance targets the  agency is responsible for achieving. FAA’s Flight Plan can be accessed via  its Web site at http://www.faa.gov/about/plans_reports/.
Committees could use the strategic plan to identify oversight questions.  For example:  Do these goals take into account legislative priorities?
Are the strategies that support each goal consistent with legislative  decisions?
How effective are the strategies in achieving these goals?
How were the specific initiatives and performance targets for each  objective strategy developed?
What key factors—external to FAA and beyond its control—exist and  how will FAA mitigate or leverage them as appropriate, if they affect the  achievement of the strategic plan goals?
Does the plan include strategies for working with stakeholders (e.g.,  airlines, local governments or airport authorities)?
section_title: Unit-Specific Business Plans
paragraphs: The agency’s Flight Plan is supported by unit-specific performance plans,  called business plans. Each line of business and staff office produces  annual business plans that demonstrate strategic alignment with the  agency Flight Plan and define core business activities. The business plans  are important tools for oversight because they provide a detailed  description of the activities and responsibilities of each business line in  supporting the Flight Plan. Specifically, the business plans define the Flight  Plan’s performance targets, the specific initiatives that support the  performance targets—and type of support required of each line of business  (e.g., lead responsibility or support responsibility)—outline the key  strategic activities in support of those initiatives; and define strategic  activity targets to help gauge progress towards achieving the strategic  initiative. The business plans can be found on FAA’s external Web site, at  http://www.faa.gov/about/plans_reports/business_plan2005/.
For example, the Air Traffic Organization’s (ATO) fiscal year 2005 business  plan details six strategic initiatives it is employing to help the agency meet  its goal to reduce General Aviation (GA) fatal accidents. Each of the  strategic initiatives, which indicates whether ATO is the lead business line  or is supporting other business lines, includes related strategic activities  and activity targets that enable the ATO to further define and measure the  degree its performance is contributing to overall agency performance.
Table 2 shows an example of one of ATO’s strategic initiatives, activities  and activity targets for supporting a Flight Plan goal.
Committees can use the business plans to identify oversight questions and  additional reports that could be made available to them. For example:   How will the information from these reports affect the strategies for  reducing accidents?
Do the activities being implemented match congressional priorities?
section_title: Annual Performance Reports
paragraphs: FAA annually publishes a detailed account of agency performance,  including its audited annual financial statements, in its Annual  Performance and Accountability Report (PAR). While this report is not  required, FAA believes it is essential to clearly and fairly present and  discuss FAA’s finances and performance. GPRA requires agencies to  measure performance toward the achievement of their goals and report  annually on their progress in program performance reports. If a goal was  not met, the report must provide an explanation and present the actions  needed to meet any unmet goals in the future. These reports provide  important information to agency managers, policy makers, and the public  on what each agency accomplished with the resources it was given. FAA’s  PAR provides Congress with annual and historical trend information for its  key performance goals. For example, under the strategic goal Increased  Safety, FAA has a performance target tied to its goal to reduce the number  of operational errors. Figure 1 shows the trend in the actual number of  operational errors between fiscal year 2002 and fiscal year 2005. FAA  exceeded its target number of operational errors in fiscal year 2003 by 38  and again in fiscal year 2004 by 8.
Based on this, potential questions for oversight could be:  What are the primary causes of operational errors?
What changes were put into place between fiscal year 2003 and 2004 to  decrease operational errors?
How was the target for 2005 set and what efforts will be put into place to  meet this target?
The financial statements, supplementary information, and notes to the  financial statements included in the PAR present historical information,  showing the financial activity of the agency for the last 2 fiscal years and  the financial position as of the end of each of those years. The five principal  financial statements include: consolidated balance sheets, consolidated  statements of net cost, consolidated statements of changes in net position,  consolidated statements of budgetary resources, and consolidated  statements of financing. The notes to the financial statements present more  detailed information about transactions or conditions reflected in these  statements. Often the Management’s Discussion and Analysis section of the  PAR will address the kinds of operating conditions or changes that  financial statement analysis discloses.
The statement of budgetary resources, which interrelates with the other  financial statements, includes key information that is also included in the  agency’s budget. This information is subjected to audit scrutiny, providing  some assurance of the reliability of related budgetary information. The  individual statements and examples of how they can be used for  congressional oversight are discussed in appendix III.
The independent auditor’s report included in the PAR tells readers whether  or not, or to what extent, the information provided in FAA’s financial  statements and related notes is, in the opinion of the auditor, fairly stated.  This report also includes the auditor’s statements on whether FAA had  effective internal control over financial reporting and over compliance with  laws and regulations, which would indicate whether financial management  issues need more attention. They also report on any identified significant  matters of noncompliance with selected provisions of applicable laws and  regulations. In effect, the audit report is a report card on how well the  agency is managed from a financial perspective.
The auditor’s unqualified opinions on FAA’s financial statements for fiscal  years 2002 through 2005 suggest that those statements are sufficiently  reliable to be used as a tool for public and congressional oversight.  However, the auditor’s reports for each of those years disclosed that FAA’s  financial management systems did not substantially comply with federal  financial management systems requirements under the Federal Financial  Management Improvement Act of 1996 (FFMIA), an issue that may  warrant additional oversight. For fiscal years 2004 and 2005, the auditor  noted, among other things, that in connection with FAA’s conversion to  Delphi as its core financial system, several key financial systems that feed  or support Delphi exhibited weaknesses regarding function, reporting or  internal control. In addition, the auditor reported that in 2005 FAA, also in  conjunction with the implementation of Delphi, had not timely processed  all of its transactions and reconciled all of its key accounts. Similar  problems had been reported for fiscal year 2004 by the auditor. While  adjustments to the recorded balances were made during the preparation of  the year end audited financial statements, these weaknesses could indicate  that the agency’s financial information during the year may not be fully  reliable.
Committee staff could use information from FAA’s independent auditor to  facilitate an understanding of financial management and compliance  issues, addressing questions such as:   Can users rely on the information provided in FAA’s financial  statements?
Did FAA have effective internal control over financial reporting and  compliance with laws and regulations?
Did FAA’s independent auditor report on any identified significant  matter of noncompliance with applicable laws and regulations?
Did FAA’s financial management improve or deteriorate over the fiscal  year?
The answers to the above questions are also key to assessing the reliability  of cost accounting information, which is discussed later. Cost accounting  information generated from FAA’s financial reporting systems is essential  to managing on-going agency operations and provides useful information to  Congress about the cost of specific programs, activities, or outputs.
FAA’s annual Performance and Accountability Report can be accessed via  FAA’s Web site at http://www.faa.gov/about/plans_reports/.
section_title: Quarterly Performance Reporting
paragraphs: In addition to annual performance reporting, FAA monitors and reports  quarterly on performance towards the strategic goals through the tracking  of 31 key performance measures. FAA management conducts monthly, day- long meetings with executives from each line of business. At these  meetings, the designated leaders for each of the four strategic goals present  information related to the performance targets for their goal. Each of the 31  performance targets is displayed using the traffic light graphics colors of  red, yellow, and green. When a target is either yellow or red, the goal leader  will discuss the steps needed to get to green—which indicates that the  performance measure is met.
Committees could use these reports to raise similar questions about ways  to improve performance to achieve the performance target. FAA reports  performance for these 31 measures on its external Web site quarterly, at  http://www.faa.gov/about/plans_reports/Performance/. For example, under  the strategic goal Increased Safety, FAA has a performance target tied to its  goal to reduce the number of GA fatal accidents. FAA’s target for fiscal year  2005 is not to exceed 343 GA fatal accidents. However, according to its final  quarterly performance report for fiscal year 2005 published on the FAA  Web site, the agency failed to meet its target, with a total of 350 GA fatal  accidents, 7 fatal accidents above the target. Figure 2 shows the quarterly  report for FAA’s measure on GA fatal accidents.
Committees could use this performance information to identify oversight  questions. For example:   Why was FAA unable to meet its target for fiscal year 2005?
What has the agency been doing to improve on its performance for this  target?
Does FAA measure the number of nonfatal GA accidents? If so, how  does it use those data?
In addition, questions could be raised about the measure itself. For  example, why does the measure track the number of GA fatal accidents  rather then the rate of GA fatal accidents?
section_title: FAA’s Budget and Long- Term Planning Documents Can Be Used to Generate Questions About FAA’s Planned Resource Use
paragraphs: The annual federal budget is developed using a year-round administrative  process of budget preparation and review. By the first Monday in February,  the President submits a budget request to Congress for the fiscal year  starting on the following October 1. However, preparation of that particular  budget request began about 10 months before it was submitted to  Congress. For example, for the fiscal year 2006 budget request, transmitted  to Congress in February 2005, the budget process began in the spring of  2004. Thus federal agencies deal concurrently with three fiscal years:   (1) the current year, that is, the fiscal year in progress; (2) the coming fiscal  year beginning October 1, for which they are seeking funds; and (3) the  following fiscal year, for which they are preparing information and  requests. In the spring and summer, agencies work with the Office of  Management and Budget (OMB) to identify major issues for the upcoming  budget request, develop and analyze options for the upcoming reviews of  agency spending and program requests, and plan for the analysis of issues  that will need decisions in the future. In September and October agencies  submit their budget requests and other initial materials to OMB, typically  on the first Monday after Labor Day of the year prior to the start of the year  that the budget request covers. From October to December OMB reviews  and briefs the President and senior advisors on the proposed budget  policies and recommends a set of proposals after reviewing all agency  requests. Budget decisions are passed back to agencies in late November  and may be appealed. Final budget decisions are transmitted to Congress in  the President’s budget request.
At the same time an agency is working to formulate a new budget, it is  executing its approved budget by spending the money Congress has  appropriated to carry out the objectives of its program legislation. During  the budget execution phase, agencies sometimes find they need more  funding than appropriated because of unanticipated circumstances. Under  such circumstances, agencies may request and Congress may enact a  supplemental appropriation.
FAA manages and reports budget decisions in several documents that  could be used to enhance oversight. The three principal budget documents  include the annual budget, the budget-in-brief and the performance-based  budget justification. FAA’s annual budget presents actual receipts and  spending levels for the fiscal year just completed, current year estimated  receipts and spending, and estimated receipts and spending for the  upcoming year as proposed by the President. The budget-in-brief  summarizes the justification for FAA’s estimated budget by strategic goal.  Finally, FAA’s performance-based budget justification provides a more  detailed outline of its planned budget according to the Flight Plan’s  strategic goals and describes the expected performance improvements.
subsections: section_title: FAA’s Budget
paragraphs: The fiscal year 2006 budget reports the total funding for all FAA programs  and provides program and financing information by budget account. FAA’s  budget has four components: operations; facilities and equipment; grants- in-aid for airports; and research, engineering, and development. There are  two sources of FAA funding: the airport and airway trust fund, which  contains ticket tax and other earmarked receipts, and general fund  appropriations. In fiscal year 2006, the trust fund provides all funding for  facilities and equipment; the airport improvement grants; and research,  engineering and development, as well as partial funding for operations. The  general fund is also used for operations and other, smaller accounts.
Many different analyses can be done with budget data to identify oversight  questions. For example, as shown in figure 3, fiscal year 2000 general fund  financing of operations and maintenance increased from its pre-2000 level.
Further, figure 4 shows that trust fund outlays have outpaced receipts since  fiscal year 2002, resulting in a decline in the trust fund balance.
Based on these analyses, some oversight questions could be:   What steps are being taken to understand the cost drivers of the  operations and maintenance portion of budget?
What is the desired balance between trust fund and general fund  financing for FAA operations?
section_title: FAA’s Budget-In-Brief
paragraphs: FAA’s budget-in-brief is a publicly available summary of FAA’s budget  justification. The budget-in-brief summarizes the FAA’s annual budget  request by appropriation and by goal area. It provides committees with a  quick comparison of resource allocation by goal and program activity for  the prior year, current year and the budget year. For example, the budget- in-brief states that safety is FAA’s primary goal and proposes spending 71  percent of the fiscal year 2006 request for the safety-related goals shown in  table 3. For the goal of reducing GA fatal accidents, FAA is proposing a  decrease from fiscal year 2005 in resources for facilities and equipment,  and grants-in-aid for airports, and in the number of full time equivalent  employees devoted to this goal.
Based on this, potential questions for oversight could be:  What changes were made in these areas to permit a reduction in funding  while still making progress toward the goal of reducing GA fatalities?
How is the decrease going to affect more ambitious targets for GA fatal  accident reductions in performance plans?
Was funding shifted from reducing GA fatal accidents to a different  safety-related activity? If so, which activity and why?
As table 3 shows, at the same time FAA is proposing decreases in certain  types of spending for reducing GA fatal accidents, FAA is proposing budget  increases for reducing commercial fatal accident rates and achieving zero  commercial space accidents. Another potential oversight question could  therefore be: is FAA proposing increases in these other areas—where FAA  is meeting its performance targets—while proposing decreases in reducing  GA fatal accidents, a goal for which FAA is not meeting its performance  target? FAA’s budget-in-brief can be accessed on its external Web site at  http://www.faa.gov/about/budget/.
section_title: FAA’s Performance-Based Budget
paragraphs: FAA’s performance-based budget, first done in fiscal year 2005 and  submitted to the appropriations committees, is a prominent source of both  performance and budgetary information on FAA and could also be useful  for oversight. It highlights FAA’s identified resource needs and what the  agency deems to be the most important performance goals for that  particular year. One goal of agency performance budgets is to show the  relationship between resources and incremental improvements in  performance. Congressional oversight could focus on whether planned  performance improvements were achieved with the resources provided or,  if not, raise questions about why they were not achieved.
For example, FAA’s fiscal year 2005 performance-based budget shows a  request for $10.2 million to reduce GA fatalities through the  implementation of the Flight Services Automation System (FSAS) and  Operational and Supportability Implementation System (OASIS).  According to the budget, FSAS and OASIS will enable flight specialists to  more efficiently provide weather and flight information, thereby aiding in  the reduction of accidents through increased pilot awareness of weather  conditions along the flight route. Committees could use information from  the performance-based budget to oversee spending on and installation of  the systems. For example:   Was the installation completed within the originally estimated funding  level?
What percentage of GA fatal accidents results from the pilots’  insufficient knowledge of weather conditions?
Are the GA fatality rates decreasing in areas where the installation has  occurred?
section_title: FAA’s Other Long-Term Planning and Budget Documents
paragraphs: FAA also produces some long-term planning and budget documents that  could be helpful for oversight. Intended to integrate and coordinate longer- term perspectives and needs of organizations affecting airspace usage,  these documents are:  National Plan of Integrated Airport Systems,   The Next Generation Air Transportation System Integrated Plan, and   Capital Investment Plan.
The first three plans were cited by FAA officials as key documents  presenting FAA’s long-term direction. The National Plan of Integrated  Airport Systems for 2005 to 2009 identifies 3,344 airports that are  significant to national air transportation and, therefore, eligible to receive  grants under the FAA’s Airport Improvement Program. The plan and grant  program support the Flight Plan’s goals of increased safety and greater  capacity. The plan describes the condition and performance of the airport  system according to six performance areas: safety, capacity, pavement  condition, financial performance, surface accessibility, and noise. In  addition, the plan provides cost estimates for needed improvements to  airports by airport type—large, medium or small hub primary; no hub  primary; non-primary commercial service; relievers; or general aviation— and by purpose of development—safety, security, reconstruction,  standards, environment, airfield capacity, terminal buildings, ground  access, and new airports. The projects are not prioritized, but inform the  grant decisions for the Airport Improvement Program. The National Plan of  Integrated Airport Systems for 2005 to 2009 can be accessed on FAA’s Web  site at  http://www.faa.gov/airports_airtraffic/airports/planning_capacity/npias/.
Based on this plan, some oversight questions could be:  How are the projects in the National Plan of Integrated Airport Systems  selected for airport improvement grants?
To what extent have the grant-funded improvements to airports  achieved performance improvements for the Flight Plan goals of  increased safety and greater capacity?
The Operational Evolution Plan, created in collaboration with the aviation  community, the Department of Defense, the National Weather Service and  the National Aeronautics and Space Administration, is a rolling 10-year  tactical implementation plan designed to increase the capacity and  efficiency of the national airspace system by approximately 30 percent  within its initial 10-year horizon. The plan identifies four specific areas for  improvement: terminal area, en route, and airport congestion; and air  traffic management flow efficiency. It also identifies milestones for  expected improvements at each of the airports included in the plan. The  Operational Evolution Plan can be accessed on FAA’s Web site at  http://www.faa.gov/programs/oep/.
Based on this plan, some oversight questions could be:   Are the milestones for expected improvements realistic and are they  being met?
As airport improvements are completed what has been the impact on  congestion? Are the changes as great as anticipated?
The Next Generation Air Transportation System Integrated Plan is a  multiorganization plan designed to transform the nation’s air transportation  system to meet expected needs in 2025. This plan outlines eight  transformation strategies that will be researched, developed, implemented  and maintained by teams composed of federal, state, and local  governments; quasi-government research institutions; universities; and the  private sector. For each strategy there is a description of the research area  and milestones for completion.
Based on this plan, some oversight questions could be:   How do the strategic goals and performance targets in the Flight Plan  and unit-specific business plans relate to these transformation  strategies?
How were these transformation strategies identified?
FAA also reports on long-term capital financing options in the Capital  Investment Plan (CIP), which is a rolling 5-year financial plan that allocates  planned funding to NAS projects. The Secretary of Transportation  transmits the CIP to Congress each year at the time of the President’s  annual budget submission. It includes estimated expenditures for each line  item in the facilities and equipment budget for the current fiscal year and  for the following 4 years. However, the CIP includes only projects that are  likely to receive funding rather than all initiatives originally considered.
According to the CIP, a project’s planned funding is based on its support for  the agency’s strategic goals and performance targets. As such, the CIP is an  important oversight tool because it not only details estimated  expenditures, but also provides the agency’s rationale for spending federal  dollars on specific projects—or a group of related projects—and explains  how such spending will enhance the agency’s ability to meet its strategic  goals, and ultimately its mission.
Based on this plan, potential questions for oversight could include:  Are the projects clearly linked to agency goals and priorities?
What other projects could meet these goals and priorities? Why were  they rejected?
section_title: Cost Accounting Provides Detailed Operating Cost Analysis
paragraphs: Financial accountability goes beyond an agency’s obtaining an unqualified  opinion on its annual financial statements. The key to financial  accountability is obtaining accurate and useful information on a timely and  ongoing basis to support day-to-day managerial decisions and oversight. As  a critical part of its new Delphi financial management system installation,  FAA’s cost accounting system (CAS) draws upon accounting information in  Delphi to provide financial information that can be used to monitor  ongoing operations as well to plan for the future. CAS has been principally  implemented in the ATO and Commercial Space Transportation, which  together comprise over 80 percent of FAA’s budget. FAA’s other two lines of  business, Aviation Safety and Airports are expected to implement CAS in  fiscal year 2006.
CAS takes direct cost data from DOT’s financial management system and  allocates those costs from the organization that incurred the costs to the  organization, product, or service that benefited from the costs. The system  allows analysis of costs aggregated within a program, activity, location or  strategic goal. Allocated costs can also be used in an analysis of  comparative operating efficiency for different operating periods or  different locations. An example is a ratio of costs to a nonfinancial activity  measure, such as cost per day, per employee, or per flight. Apparent  abnormalities in trends or at particular locations may then be investigated.  For example, at FAA the direct cost of an air traffic controller at a terminal  would be allocated to airport operations, in proportion to takeoffs and  landings, which are a major “driver” of those costs. Similarly, the indirect  cost of a maintenance technician would be allocated to the lines of  business that benefited from those costs using an appropriate allocation  base.
A financial scoreboard in use at FAA regularly tracks trends in these unit  costs, overhead rates, and other performance measures. Tracking these  trends is key to identifying operating inefficiencies and, when projected to  anticipated operating volumes, can help determine future financing needs.
According to FAA, CAS provided labor and overhead cost data which were  used in the preparation of a competitive sourcing study for ATO flight  service stations. The cost data were used as a basis to estimate the future  cost of those existing in-house flight services. Comparison of those  projected in-house costs to the costs of procuring the services from bidders  in the private sector resulted in contracting out ATO Flight Service Stations  in fiscal year 2005 at a projected contract savings of about $2.2 billion  through fiscal year 2015. FAA has also reported that CAS data led to  cancellation of a $27 million airport weather program and to savings of $7  million from modification of an airport radar surveillance program.
CAS can break down the full costs for the individual activities undertaken  to provide each of ATO’s services—En Route, Oceanic, Flight Services,  and Terminal Services—by location, program and function. Using this kind  of information, a separate fiscal year 2004 performance report prepared by  ATO displayed unit costs of certain activities and services as well as some  overall ATO revenue and cost trend analyses and other performance  measures. The report cited a reduction of ATO’s total unit cost per flight by  $17, or 4.21 percent. This type of report is a tool for ongoing congressional  oversight, addressing key operating issues identified by ATO management.
Committees could use information from FAA’s cost accounting system to  better understand costs and performance of individual programs, activities,  or outputs, addressing questions such as:  What is the total cost of ATO services per flight?
How do this year’s costs per flight compare to last year’s?
How does the per flight cost of traffic controllers compare among  airports?
CAS can be used to link costs to strategic performance areas and to  combine air traffic safety data with financial information. FAA has also  used cost finding techniques for selected programs during the fiscal year  2006 budget cycle to estimate the marginal cost of performance, i.e., the  incremental results that might be achieved at different levels of funding.
section_title: Analytical Agencies and Organizations Can Provide Information and Analysis to Enhance Oversight Efforts
paragraphs: Through its legislative support agencies—GAO, Congressional Research  Service and the Congressional Budget Office—and the Department of  Transportation’s Inspector General, congressional committees also have  access to considerable resources for oversight. See appendix II for a  summary of additional information resources.
GAO, as the investigative arm of Congress, examines the use of public  funds; evaluates federal programs and activities; and provides analyses,  options, and other assistance to help Congress make effective oversight,  policy, and funding decisions. Several documents that GAO produces on an  ongoing basis or as part of a body of work may prove useful to  congressional committees when setting an oversight agenda.
GAO Strategic Plan (2004-2009) GAO’s strategic plan, which has  been updated every 2 years since 2000, describes the trends and issues  that are likely to affect congressional decision makers over the 6-year  period of the plan. It also provides GAO’s plans for analyses and other  activities to help support Congress’s information needs. One of GAO’s  strategic objectives is to support congressional and federal efforts to  obtain and maintain a safe, secure, and effective national physical  infrastructure. Several performance goals under this objective involve  transportation-related issues, including assessing efforts to improve  safety and security in the nation’s transportation system and assess the  impact of transportation policies and practices. As such, oversight  committees can look to GAO for information on these issues and more.
High-Risk Series: An Update Since 1990, GAO has periodically  reported—generally at the start of each new Congress—on government  operations it identifies as having a high risk of fraud, waste, abuse, and  mismanagement. Increasingly, the list has grown to include programs or  agencies that need urgent attention or transformation, such as the  Department of Homeland Security. In the January 2005 update, GAO  presented the status of areas previously identified as high-risk. These  included two involving FAA—FAA Financial Management and FAA Air  Traffic Control modernization. We determined that FAA’s progress in  improving financial management overall, a high-risk area since 1999, has  been sufficient to remove it from the list. However, while FAA had made  progress in addressing root causes of problems with its Air Traffic  Control modernization, originally designated as high-risk in 1995, we  maintained the high-risk designation. Therefore, the status of FAA’s Air  Traffic Control modernization may be an area for oversight by the  Transportation and Infrastructure Committee.  21st Century Challenges: Reexamining the Base of the Federal  Government In February 2005, GAO issued a report on 21st century  challenges facing the nation—including the federal government’s long- term fiscal imbalance and changing demographics—that suggests the  need to reexamine the base of the federal government. The report is  intended to help Congress address these challenges by providing a  series of illustrative questions, both generic and for 12 examination  areas that could help support a fundamental and broad-based  reexamination initiative. One of the 12 examination areas we identified  is transportation, in which the report describes FAA’s challenge in  addressing the declining revenues in the Aviation Trust Fund and how  that could affect funding for the agency. Committees could ask the  related illustrative question: Should the federal government continue to  provide public financing to stimulate private financing in areas such as  aviation, where a mix of private and public beneficiaries exists?
In addition, through our review of federal programs and activities, we have  a large body of work on aviation issues, FAA management, programs, and  performance. Further, committees can also request additional evaluations  to address issues of further interest. Recent examples of these reports  include the following:  National Airspace System: Initiatives to Reduce Flight Delays and  Enhance Capacity Are Ongoing but Challenges Remain;   Airport and Airway Trust Fund: Preliminary Observations on Past,  Present, and Future; Air Traffic Control: FAA Needs to Ensure Better Coordination When  Approving Air Traffic Control Systems;   Air Traffic Control: FAA’s Acquisition Management Has Improved, but  Policies and Oversight Need Strengthening to Help Ensure Results;   Aviation Safety: FAA Needs to Strengthen the Management of Its  Designee Programs;   National Airspace System: FAA Has Made Progress but Continues to  Face Challenges in Acquiring Major Traffic Control Systems;  DOT’s OIG works within DOT to promote effectiveness and head off, or  stop, waste, fraud and abuse in departmental programs through audits and  investigations. The OIG also consults with Congress about programs in  progress and proposed laws and regulations. The OIG also publishes  semiannual reports, which summarize its recent audits and investigations.  In addition, the OIG annually reports on the top management challenges  facing DOT. DOT’s Top Management Challenges report can be found at:  http://www.oig.dot.gov/item.jsp?id=1701. Three challenges identified in the  most recent management challenges report by the OIG, relate wholly to  FAA.
Mitigating flight delays and relieving congestion—actions needed  to meet demand. The OIG report states that the growth in aviation  operations has brought an increase in the number of aviation delays,  with the incidence, rate, and length of delays in the summer of 2005  approaching 2000 levels, generally regarded as the worst summer of  aviation delays. The report states that DOT will need to develop a  toolbox of relief measures to use including new construction,  technological improvements, procedural changes, administrative  controls, and market-based solutions. The report also states that new  runways provide the most increases in capacity, and that DOT and FAA  will need to ensure the navigation equipment and airspace modifications  are in place before the eight new runway projects, planned to be  completed by 2008, are constructed. Finally, FAA will need to continue  to consider the use of market-based solutions to mitigate congestion,  such as schedule caps and congestion pricing.
Reauthorizing aviation programs—establishing requirements and  controlling costs are prerequisites for examining FAA financing  options. The OIG report states that a major focus of the FAA over the  next year will be preparing to reauthorize a wide range of aviation  programs and exploring alternative financing mechanisms. Challenges  facing FAA include (1) controlling costs with major acquisitions by  delivering new systems that work, are on time, and are within budget,  and by making decisions on the scope of billion-dollar projects that have  been delayed for years; (2) getting control of support service contracts,  reducing associated costs, and following through on the implementation  of new procedures; (3) establishing requirements for the next  generation air traffic management system; (4) addressing the expected  surge in controller attrition and negotiating an affordable and equitable  bargaining agreement; and (5) completing a cost-accounting system to  reduce costs and improve operations.
Aviation safety—developing effective oversight programs for air  carrier operations, repair station maintenance, and operational  errors. The OIG report states that the FAA maintains an impressive  safety record, but still faces challenges with air carrier and repair station  oversight as a result of financial uncertainty, competition from low-cost  carriers, and rebounding air traffic. Further, the report states that the  FAA experienced an increase in the number of reported operational  errors—when planes come too close together in the air—over the past  year, and at additional locations where operational errors were not  reported.
section_title: Regular Communication and Timely Access to Useful Information Can Enhance Oversight
paragraphs: Effective communication among agency officials, Members of Congress  and congressional staff is needed to ensure that information agencies  provide meets committee needs. While considerable information resources  are available, they may not be available in a manner that is useful to  committees. We have previously reported, in a review of interactions  between the Congress and other executive branch agencies, that although  agencies collect and produce a great deal of useful information, much of it  did not reach the interested congressional committees, and the information  that did reach the committees was difficult to digest, too highly aggregated,  or was received too late to be useful. While FAA provides a great deal of  information on its Web site, enhancing access to agency information using  technology can improve the timeliness and usefulness of agency  information to the Congress. For example, information alerts and  summaries from the agency could be effective information sharing tools.  Further, regular meetings between committees, staff and agency officials  could identify the committee’s principal oversight objectives, provide a  forum to discuss the issues, and develop the best approaches to meet them.
subsections: section_title: Access to Timely and Useful Agency Information Could Improve Committee Oversight
paragraphs: Providing relevant agency information using technology solutions can  improve committee access and minimize the effort required of agency staff.  House Transportation and Infrastructure Committee staff indicated that  FAA has a large quantity of information available and effective  communication between the staff and the agency, but it is also interested in  using technology to gain additional, timely access to agency data when  conducting oversight. From our discussions with committee and agency  staff, improving access through technology solutions could meet the needs  of both groups. Access to information could be improved by  A For Congress page on FAA’s Web site,  A Frequently Asked Questions section on the For Congress Web site,  A Web site subscription service notifying committee staff when relevant  information has been updated, and  Moderated access rights to selected FAA documents.
Several applications allowing Web-based access to information could  benefit both the committee seeking information as well as the agency that  provides information. For example, as a result of our discussions with  committee and agency staff, FAA has initiated a For Congress page on its  Web site. The page provides a single point of access for information  committee staff identified in our discussions as relevant for oversight, as  shown in figure 5. In addition, following a recommendation contained in  our draft report, FAA added a subscription e-mail service to notify  congressional users about new information available, such as new press  releases and speeches by agency officials. We had pointed out that a  subscription service could enhance the timeliness in which Congress  receives information for oversight. For example, a subscription service  notifying committees when notices of proposed rulemakings and other  regulatory or policy guidance documents are published would give  committees relevant information in a timely manner.
The For Congress Web site could be further improved by including a  Frequently Asked Questions (FAQ) section to provide information often  requested by committees. According to a manager within FAA, the agency  provides a great deal of budget information to Congress in response to  questions for the record (QFRs) that are submitted by the appropriations  committees of both chambers. However, the agency response is shared  only with the requesting committee, even though it could be useful to all  committees involved in oversight. In addition, many of these QFRs, as well  as other requests for information, are handled in an ad hoc manner by  individual FAA officials. When similar requests for information arrive, FAA  officials often have to create an entirely new response. An FAA official said  they had a general FAQ section, available on the bottom of all FAA Web  pages, but it does not include the QFRs, or other questions regarding FAA  planning, budgeting or performance. A FAQ section on the For Congress  Web page could minimize agency efforts by allowing it to post requested  information once, rather than tying up valuable time and resources by  repeatedly responding to similar questions. In addition, sharing agency  responses to congressional information requests could enable quick access  to information likely to assist in other congressional efforts.
Other uses of technology, such as granting moderated access rights to  selected FAA documents, could also enhance committee access to  information. Moderated access would allow increased access of FAA  information to committee staff, beyond what is available on the agency’s  public Web site. To provide moderated access, individual committee staff  would be issued accounts or use passwords to obtain access to information  restricted to congressional users. The content allowed through the  moderated access would be negotiated between the agency and committee.  One way for committees to identify documents that are available would be  to provide increased search capabilities on the FAA Web site. Increasing  the Web site search capability would allow committees to identify what  information exists, even if the entire document content was not  immediately available. Using this knowledge of what information exists,  committees could better identify exactly which of the information they  would like to have made available through moderated access.
section_title: Regular Meetings Between Committees and Agency Officials Could Provide a Forum to Discuss Oversight Issues
paragraphs: We have previously reported in a review of interactions between Congress  and other executive branch agencies, that communication between  committees and agency staff is often one-way, with little opportunity for  direct discussion. According to Transportation and Infrastructure  Committee staff, they generally contact the agency when they have a  specific question, on an ad hoc basis. Transportation and Infrastructure  Committee staff and experts we interviewed said constant communication  with agencies within the committee’s jurisdiction, both formal and  informal, could contribute to successful oversight. Developing a routine  schedule of meetings could create a degree of certainty for both parties  that issues important to each will be discussed. The timing, frequency,  attendees, and agenda items could be negotiated in advance by both  parties. Meetings could serve several purposes—they could be used to  identify the committee’s principal oversight objectives, provide a forum to  discuss the issues, and develop the best approaches to meet them.
Agency officials that we spoke with also supported regular meetings with  committees. An FAA official said establishing an effective way to regularly  communicate with Transportation and Infrastructure Committee staff  would better enable FAA to directly inform the committee about emerging  issues, whereas now the committee often relies on third party analysis and  information. They understood that such meetings were not only  opportunities for the committee to improve its oversight capacity, but also  were opportunities for the agency to identify issues that may have received  less attention and to help put the large amount of performance, budget, and  financial information in a broader context so that committees can better  understand the agency’s operations. The potential benefits of regular  committee and agency staff meetings were evident during the constructive  discussions coordinated by GAO for this report.
section_title: Conclusions
paragraphs: In order to conduct effective oversight of federal agencies and programs,  congressional committees need access to timely and useful information.  The types of information we identified as available for FAA management  could also be used for oversight. Moreover, these types of information are  produced routinely by all federal agencies and could be used by  committees of jurisdictions to regularly monitor agency performance.
However, as government grows more complex and agencies produce more  information, it becomes harder for Congress to access, analyze, and  summarize this information to develop its policy positions and legislative  enactments. New ways must be continually found to use emerging  technology and approaches to make agency information transparent and  readily available. But despite the availability of information, and in FAA’s  case, its public accessibility, more can be done to make this information  readily accessible to congressional committees. In particular, improving  access to information via technology solutions like those described in this  report could allow congressional committees to access information as  needed and minimize the number of duplicative information requests  agencies are asked to respond to. In addition, establishing a schedule of  routine meetings will provide congressional committees and agency  officials with the opportunity to discuss in-depth the issues and challenges  facing all federal agencies, including FAA. Establishing a collaborative  approach to oversight will allow more consistent, rather than ad hoc,  committee oversight. Importantly, these findings constitute lessons learned  that may be transferable to other agencies.
section_title: Recommendations for Executive Action
paragraphs: We recommend the Secretary of the Department of Transportation, direct  the Administrator of FAA, to take the following actions to further enhance  committee access to FAA information:  Continue to work with committee staff to further refine the For  Congress Web site by improving the flow of information and taking  advantage of emerging technologies;   Include a Frequently Asked Questions page on the For Congress site,  allowing oversight committees to quickly find answers to commonly  requested items relevant to Congress;  Add moderated access on the For Congress Web site to allow access to  information that should be made available to congressional committees,  yet may not be appropriate for the general public;  Consider offering regular meetings between the Members of the  committee and key staff with senior FAA executives to address matters  of mutual concern.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Secretary of the Department of  Transportation for review and comment. We received comments from FAA  officials, including the Deputy Assistant Administrator for Financial  Services, who indicated that they were pleased to serve as our case study  and they would consider the report’s recommendations as they continue to  strive for excellence in fulfilling the Congress’ information needs. The  officials said that they endeavor to ensure Congress is fully informed of  FAA’s planned and ongoing programs and activities, relying on a staff of  dedicated professionals who know and understand the needs of Congress  to maintain a steady flow of useful information to Congress. The officials  also said that they make extensive use of technology to enhance the  information available to Congress. They noted that a considerable amount  of information is available to Members of Congress and their staff in a  section of FAA’s Web site dedicated to serving the information needs of  Congress—as our report notes, an improvement developed as a result of  discussions between agency and congressional staff during our review. In  addition, they indicated they had created a subscription e-mail service to  enable committee staff to be notified when information is updated on their  Web site, such as with new press releases and speeches by agency officials.  As noted earlier, this action was recommended in our draft report;  consequently, since FAA has taken these steps, we have eliminated the  recommendation from the final report.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days after its  issuance date. At that time, we will send copies of this report to the  Secretary of Transportation and will make copies available to others upon  request. In addition, the report will be available at no charge on GAO’s Web  site at http://www.gao.gov.
Please contact me on (202) 512-6543 if you or your staff have any questions  about this report. Contact points for our Office of Congressional Relations  and Public Affairs may be found on the last page of this report. Other  contacts and staff acknowledgments are listed in appendix IV.
section_title: Objectives, Scope and Methodology
paragraphs: The objectives of this report were to identify (1) information FAA produces  that could enhance congressional oversight; (2) other available information  resources that could enhance congressional oversight; and, (3) how  committee access to FAA’s information could be improved to enhance  timeliness and usefulness.
To identify the information and delivery mechanisms that would enhance  the committee’s ability to oversee FAA programs and management, we met  with staff from the U.S. House of Representatives Committee on  Transportation and Infrastructure and its subcommittee on Aviation.
To identify information produced by FAA that could enhance oversight, we  met with FAA senior officials from numerous offices, including several  lines of business—Airports; Air Traffic Organization; and Aviation Safety— and staff offices—Aviation Policy, Planning and Environment; Financial  Services; Government and Industry Affairs; Human Resources and  Management. In addition, we met with officials from the Chief Information  Office/Office of Information Services and the Office of Inspector General  for the Department of Transportation.
To identify information resources external to FAA that could enhance  congressional oversight, we met with officials from other government  entities such as the Congressional Research Service, the General Service  Administration’s FirstGov initiative, and the Office of Management and  Budget. In addition, we met with technology representatives from Lexis- Nexis. Finally, we attended meetings with representatives from the  Mercatus Center, CATO Institute, and the Heritage Foundation, hosted by  the House Committee on Transportation and Infrastructure.
In addition, we reviewed FAA performance, budget and financial  documents and FAA’s Web site. We also reviewed reports and evaluations  produced by analytical agencies and organizations and prior GAO work in  this area.
Written comments from FAA are included in appendix II. We conducted our  work from September 2004 through November 2005 in accordance with  generally accepted government auditing standards.
section_title: Financial Statements Provide Insights into Agency Financial Management and Resources
paragraphs: FAA’s annual financial statements can be used to analyze the agency’s  operating results and its financial position. Most of this analysis involves  looking at how various individual reported amounts interrelate or  represent the agency as a whole, and how those amounts or relationships  change from period to period. The historical information presented can  establish a baseline for estimates of future operations and funding needs.
Agency financial information can be valuable for  facilitating an understanding of an agency’s operations;  providing a common database for the development, analysis, and debate   supporting an historical perspective from which to evaluate future  plans, budgets, and spending proposals;  assessing agency accountability for actual results when compared to   evaluating program costs.
Further information regarding federal financial statements can be found in  a guide to the annual financial report of the U.S. Government, published  recently by GAO. This guide can be helpful to Congress and taxpayers in  evaluating both governmentwide financial reports and those of individual  agencies.
subsections: section_title: FAA’s Balance Sheet
paragraphs: FAA’s balance sheet shows an end-of-the-year view of its overall financial  position, its assets (what it owns), its liabilities (what it owes), and the  difference between the two (its net position). A wide variety of analyses  can be applied to information presented in FAA’s consolidated balance  sheets for fiscal years 2003 and 2004, which are presented in Figure 6.
Committee staff could use information from FAA’s balance sheet to  facilitate a better understanding of the agency’s financial position,  addressing questions such as  What are FAA’s largest asset and liability categories?
What is the makeup of FAA’s assets and liabilities?
What future funding may be required to replace deteriorating operating  assets and to satisfy long-term liabilities?
For example, as shown in Figure 7, FAA’s two largest asset categories are  property, plant, and equipment valued at about $14.5 billion and  investments valued at about $10.3 billion. For additional information about  the makeup of these assets, the balance sheet refers readers to the related  notes. Referring to the related note 6, one can learn that the acquisition  value (cost) of personal property (e.g. equipment) increased by $1.3 billion,  or 10 percent, from fiscal year 2003 to fiscal year 2004, and that the sizeable  increase in the reported cost of property, plant, and equipment includes  new acquisitions of National Airspace System equipment. The balance  sheet and notes also show that FAA has significant amounts invested in the  Airport and Airway Trust Fund but that the balance of these investments  fell during fiscal year 2004. A possible inquiry to the FAA might address a  relationship between the investment balance and additions to property,  plant and equipment. Also disclosed in note 6, the accumulated  depreciation of each asset class is one potential indicator of the relative  deterioration of those assets. Accumulated depreciation is ultimately  limited to the original acquisition value of an asset, and substantially  depreciated assets may possibly soon require funding for their  replacement.
The balance sheet also indicates a significant percentage increase in  accounts receivable that are not intragovernmental transactions among  federal entities. Though less significant than some of the other amounts  shown in the balance sheet, such an increase might warrant a follow-up  discussion with FAA regarding its cause and whether this indicates a new  trend that will require funding from additional appropriations in the future.
section_title: Statement of Net Cost
paragraphs: FAA’s statement of net cost is intended to show how much it costs  taxpayers to operate FAA. Net cost is calculated by subtracting any earned  revenues from gross cost, which include program costs as well as  administrative costs, resulting in FAA’s costs to taxpayers. As shown in  Figure 8, FAA’s statement of net costs presents cost information for each of  its four major lines of business – air traffic organization, regulation and  certification, airports, and commercial space transportation -- and two  categories that are not lines of business, including agency overhead.
Committee staff could use information from FAA’s statement of net cost to  enhance their understanding of possible future cost trends, addressing  questions such as:   How much did FAA’s net cost increase or decrease from the prior fiscal  year?
Which of FAA’s programs experienced the largest increase and which  experienced the largest decrease in net cost from the prior fiscal year?
Which of FAA’s programs accounted for most of its net cost?
For example, FAA’s statements of net cost for fiscal years 2003 and 2004  show that other than a nearly $200 million (6.8 percent) increase in net  costs related to the airport program, operating results were substantially  consistent for those two years, indicating that future operating costs of  FAA’s other business lines may be stable. Based on the airports’ program  increase, a reader may decide to perform further analysis using FAA’s  statements of net cost from prior fiscal years. As shown in Figure 9, further  analysis of the airport program over time indicates that net costs for the  program have doubled over the last four fiscal years. This may prompt  questions to determine the causes for the increase, whether this growth  was expected and, going forward, how much the airport program should  continue to grow.
FAA provides additional information about the distribution of net costs in  note 12 of its financial statements, which is summarized in Figure 10. This  information shows that FAA’s most costly line of business was air traffic  organization, which accounted for about two-thirds of its net costs. The net  cost information provided in note 12 also shows that 72 percent of FAA’s  net costs were used to support its strategic goal of safety. Using the  information about net costs disclosed by FAA, a reader can consider  whether FAA’s current cost distribution appropriately reflects its strategic  goals and congressional priorities, or whether resources should be  redirected.
section_title: Statement of Changes in Net Position
paragraphs: FAA’s statement of changes in net position shows how it financed its  operations for the fiscal year. It shows the agency’s net position at the  beginning of the fiscal year, the major inflows and outflows of funds that  caused the net position to change during the year, and the ending net  position. FAA’s statements of changes in net position for fiscal years 2003  and 2004 are displayed in figure 11.
Committee staff could use information from the statement of changes in  net position to facilitate a better understanding of FAA’s financial position  and direction, addressing questions such as:   What were FAA’s primary financing sources and how much did they  increase or decrease?
To what extent did FAA’s excise tax revenue cover its net costs?
Did FAA’s net position improve or deteriorate?
For example, FAA’s statement of changes in net position shows that FAA is  primarily financed through excise tax revenue and appropriations.  However, fiscal year 2004 appropriations used decreased by about 20  percent from the previous year, while excise taxes and associated revenue  rose by about three percent, conditions that if analyzed in greater detail,  might reveal important information about the agency’s future aggregate  spending or income trends. For example, the decrease from fiscal year 2003  to 2004 in appropriations used approximated the amount associated with  FAA’s 2003 transferred operations, leading a reader to infer that the two are  related. However, analyzing the trend of this information going forward  may tell a different story about the agency’s direction. If the trend indicated  by FAA’s statement of changes in net position for fiscal year 2004 continues,  FAA may be able to meet more of its costs through service fees and excise  taxes rather than appropriated funds. Also, the percentage composition of  financing sources can be compared to that of other agencies or programs.
section_title: Statement of Budgetary Resources
paragraphs: The statement of budgetary resources presents the amount of budgetary  resources available during the fiscal year and the status of those resources  at the end of the year. This statement provides basic information about  budget authority made available from appropriations, fee collection, and,  when applicable, borrowing authority. The relationship of obligations to  outlays is also presented for the fiscal year. FAA’s statements of budgetary  resources for fiscal years 2003 and 2004 are displayed in figure 12.
Committee staff could use information from FAA’s statement of budgetary  resources to obtain an overview of the agency’s financial position and  direction, addressing questions such as:   Were there increases or decreases in budget authority, unobligated  budgetary resources, total budgetary resources, obligations incurred,  and/or disbursements?
To what extent were current fiscal year budgetary resources used?
For example, FAA’s statements of budgetary resources for fiscal years 2003  and 2004 show that budgetary authority, budgetary resources, obligations  incurred, and disbursements all increased in fiscal year 2004, indicating a  possible expansion in FAA’s overall activities for the year. However, FAA’s  budgetary resources increased at a faster pace than outlays and  obligations, which might indicate a change in FAA’s budgetary needs that  should be analyzed further.
FAA provides additional information about the use of its budgetary  resources in the required supplementary information section of its PAR,  which includes a schedule of budgetary resources by major fund type. As  shown in figure 13, an analysis of this schedule shows that the operations  fund uses the most budgetary resources followed by the grants-in-aid to  airports fund and the facilities and equipment fund. In addition, readers  may compare the fiscal year 2004 schedule of budgetary resources by  major fund type to schedules for prior years. A comparison of the fiscal  year 2003 and 2004 schedules included in the 2004 PAR shows that  budgetary resources for facilities and equipment grew by 3.8 percent,  compared to 8.1 percent growth for grants and 5.0 percent growth for  operations. This type of analysis allows for consideration as to whether  FAA’s current use of budgetary resources is efficient and reflects  congressional priorities.
section_title: Statement of Financing
paragraphs: The statement of financing reconciles the resources used to finance an  agency’s operations for each fiscal year using budgetary accounting with  the net cost of operations determined using the accrual basis of  accounting. It explains the differences between an agency’s obligations of  budget authority as reported in budget documents and the statement of  budgetary resources, and the net cost of its operations as shown in the  statement of net cost, indicating the various categories of transactions that  are considered when preparing one of those statements but not the other.  The statement illustrates the link between budgetary accounting (primarily  cash basis), which records obligations when goods and services are  ordered, and financial (accrual basis) accounting, which records expenses  when goods are consumed and services are received in fulfillment of the  agency’s objectives. FAA’s fiscal year 2003 and 2004 statements of financing  are shown in figure 14.
Committee staff could use information from the statement of financing to  facilitate an understanding of FAA’s financial position and direction,  addressing questions such as:   How much of FAA’s net costs were due to the depreciation of its assets?
How much did FAA spend on capitalized fixed assets?
For example, FAA’s statements of financing for fiscal years 2003 and 2004  show an increase of 29 percent in resources used to acquire assets,  transactions which affect budgetary resources but are not shown on the  statement of net costs until they are used up or depreciated, in the case of  property, plant, and equipment. As a result, additional oversight may be  warranted for the increase in resources being used to finance the  acquisition of assets.
section_title: GAO Contact and Staff Acknowledgements
subsections: section_title: GAO Contact
paragraphs: Bernice Steinhardt on (202) 512-6543 or steinhardtb@gao.gov.
section_title: Acknowledgments
paragraphs: In addition to the contact names above, Linda Calbom, Director; Christine  Bonham, Assistant Director; Elizabeth Curda, Assistant Director; Jack  Warner, Assistant Director; Kevin J. Conway, Fred Evans, Benjamin Licht,  and Chelsa Gurkin made significant contributions to this report.