The secretary of the Department of the Interior created OAS in 1973 to resolve several aviation program problems: numerous accidents, improper budgeting and financial management, and poor utilization of aircraft. A 1973 task force, comprising representatives from across the Interior bureaus, attributed these problems to the decentralized aviation program—with each bureau responsible for all aviation functions. The secretary of the Department of the Interior charged OAS with responsibility for (1) coordinating and directing all fleet and contract aircraft; (2) establishing and maintaining standards for safety, procurement, and utilization; (3) budgeting for and financially controlling fleet and contract aircraft; and (4) providing technical aviation services to the bureaus. As the program evolved, OAS assumed responsibility for policy oversight and aviation services, while the bureaus became responsible for implementing safety requirements, deciding on whether to use fleet or contract aircraft, and the scheduling and use of their aircraft. OAS works with the Aviation Management Board of Directors to involve the bureaus in formulating policy and managing aviation activities. In addition, since 1996, the bureaus’ aviation managers have also participated with OAS in setting fleet rates and planning for aircraft replacement and projected aviation program requirements. Eight Interior bureaus use OAS’s services in varying degrees to carry out their respective missions as shown in figure 1. The Bureau of Land Management—which accounted for over one-third of the OAS program in flight hours for fiscal year 2000— uses aircraft to carry out its fire-fighting and resource management missions. The Fish and Wildlife Service and the National Park Service depend heavily on OAS to manage fleet aircraft to achieve their respective missions. OAS is headquartered in Boise, Idaho, with significant operations located in Anchorage, Alaska. It has additional offices in Boise; Atlanta, Georgia; and Phoenix, Arizona. OAS operated with approximately 94 FTE in fiscal year 2000, 63 located in the lower 48 states and 31 located in the Anchorage office. In fiscal year 2000, OAS managed 95 government-owned aircraft, 42 based in the lower 48 states and 53 based in Alaska. OAS contracts for aircraft maintenance of fleet aircraft in the lower 48 states. In Alaska, OAS contracts for maintenance of fleet aircraft with private vendors, but maintains an in-house core maintenance staff. To fulfill its responsibilities, OAS set up functional divisions, including financial and information management, acquisition, and technical services. However, OAS accounts for and reports costs across four lines of business: fleet, contract, rental, and other. Of the $117 million spent on aviation services in fiscal year 2000, OAS received an appropriation of only $800,000 (or approximately seven FTE) to provide oversight of OAS department-wide aviation policies and procedures. Most of OAS’s costs are financed through a working capital fund, established in the Office of the Secretary to finance a continuing cycle of operations, and must be repaid to the fund by the bureaus and others using the services based on rates determined by OAS. Since 1975 Interior’s aviation accident rate has been cut in half, from 18.8 accidents per 100,000 flight hours in fiscal year 1975 to 8.7 accidents per 100,000 flight hours in fiscal year 2001. A number of OAS efforts have contributed to this reduction. Prior to the establishment of OAS’s aviation safety efforts, safety standards varied from bureau to bureau and between regions within bureaus; in some cases, standards did not exist at all. According to the 1973 task force, virtually no control over aviation operations existed within the department, which resulted in a high accident rate and higher operational costs. OAS officials attribute the department’s reduced accident rate, in part, to the implementation of a standard aviation operating policy. OAS sets pilot qualifications and proficiency standards as well as standards for aircraft maintenance and equipment inspections. These standards exceed the Federal Aviation Administration’s (FAA) requirements. In addition, OAS periodically evaluates the bureaus’ implementation of the aviation program, with a special emphasis on safe operations. The OAS Aviation Safety Management Office, reporting to the OAS director, is responsible for policy development, implementation, and review of the department’s (1) aviation safety management and aircraft accident/incident prevention programs; (2) accident and incident investigation; (3) management of the department’s reporting system for aircraft accidents, incidents, and hazards; and (4) management of the OAS aviation and occupational safety and health programs. Since April 1995, OAS is required to report accidents involving fatalities, serious injuries, or substantial damage to the National Transportation Safety Board and to assist the board with accident investigations when appropriate. The OAS Division of Technical Services oversees many day-to-day safety concerns, such as pilot training, aircraft engineering and maintenance, and technical policy development. The bureau directors are ultimately responsible for adherence to standards and the implementation of an effective accident prevention program. Since safety oversight was centralized under OAS, Interior has seen a dramatic decline in the rate of accidents, as shown in figure 2. OAS accepts applicable FAA regulations as baseline criteria for its aviation operations and then applies additional standards in order to reduce accidents that occur during hazardous flying conditions and specialized operations required by the bureaus’ unique missions. These standards are published in the department’s manual and in OAS’s operational procedures memoranda. Additional policy directives issued by the bureaus may be more restrictive but may never be less restrictive than OAS’s standards. These manuals specify more stringent pilot qualifications than those required by federal aviation regulations. For example, FAA requires pilots who fly passengers on commuter aircraft to have a commercial pilot certificate, which requires a minimum of 250 flight hours. However, OAS requires its contract pilots to have 1,500 flight hours to be eligible to fly missions for Interior. OAS also requires most of its fleet pilots to have a minimum of 500 hours of time commanding an aircraft to operate government-controlled aircraft, although there is no similar requirement in the federal aviation regulations. OAS has also developed additional aircraft maintenance standards for all Interior-owned aircraft and all contract aircraft that operate for Interior. For example, OAS requires a flight test following an aircraft overhaul, a major repair, or a replacement of engine or propeller. In addition to requirements for flight tests and 100-hour inspections, OAS developed standards for the inspection and maintenance of special use and mission- related equipment that is not covered by FAA regulations. Although OAS strives to meet or exceed all FAA regulatory standards on manufacturer requirements, OAS has granted exceptions to manufacturers’ weight requirements for certain aircraft—eight Cessna 206 Amphibians and one De Havilland DHC-2T Beaver aircraft. OAS granted these exceptions to the Fish and Wildlife Service to allow the aircraft to exceed the manufacturers’ weight limitations when the service conducts surveys of migratory birds. The exceptions were required to compensate for special equipment needed to conduct these surveys and to carry extra fuel during long flights over remote areas. OAS granted the exceptions with several stipulations designed to enhance the safety of these operations. Furthermore, to verify that the aircraft are operating under safe conditions, OAS had an engineering analysis conducted on the eight Cessna aircraft and has an engineering analysis in progress on the De Havilland Beaver. OAS also awarded a development contract on June 5, 2001, to provide a replacement aircraft that will meet all migratory bird mission requirements, thereby eliminating the need for all overweight exceptions to policy. From fiscal year 1997 through fiscal year 2000, OAS did not recover about $4 million from Interior’s bureaus. We found two primary reasons why OAS set rates too low to fully recover its costs: (1) actual flight hours were lower than the projected hours based on historical usage and (2) all costs were not included in the estimates. As a result, OAS had to subsidize the costs of the aircraft used by Interior bureaus in part with funds from its reserve accounts, collected in prior years, such as the reserve fund for replacing aircraft. OAS’s failure to recover all its costs from the bureaus was not attributable to any faults in OAS’s accounting system but to deficiencies in the fleet rate model and rate process. We found the accounting system capable of producing financial information that is reasonably complete, reliable, and useful to OAS management for the purposes of setting rates. OAS recovers its costs from users by charging for its services. Costs for fleet aircraft are recovered based on fleet rates, and costs for contract aircraft are recovered based on agreements for the cost of the contract plus OAS’s costs for servicing these agreements. OAS provides four lines of services—fleet, contract, rental, and miscellaneous (other)—to Interior’s bureaus and other agencies, such as those within the Departments of Defense and of Agriculture. For fiscal years 1997 through fiscal year 2000, OAS failed to recover about $4 million from the Interior sector of its business while realizing a slight overcharge of approximately $400,000 from agencies outside Interior. Table 1 shows, by business line, where these unrecovered costs occurred. As table 1 shows, the majority of unrecovered costs were in the fleet business line. The fleet business recovered less of its costs because OAS and the bureaus’ aviation managers had not correctly determined and set the appropriate rates. To determine the rates it needs to charge its users to recover the costs of its services, OAS captures the historical costs associated with each aircraft. OAS then projects the future costs based on its analysis of the historical costs, adjusted for inflation, and determines a means by which to allocate projected costs to the appropriate user. Based on this allocation, OAS calculates the hourly and monthly rates of the fleet rates using a fleet rate model. OAS then meets with the bureaus’ aviation managers to get their input on the rates and makes subsequent adjustments to its projections of future costs if necessary.