Those Not in the Governing Class Still Call it, 'Fraud' and/or 'Theft.'

The Department of Transportation's Inspector General was asked to have a look at some airport accounting issues, as a service to the cash-strapped FAA. It turns out that, if this small sample is representative, the FAA may not really have a budget problem at all -- it may be looking at criminal conspiracies.

The report notes, "Given the budget constraints now facing FAA, the results of this report regarding diversions of airport funds underscore the need for continued and vigilant oversight of airport revenue use."

They didn't have time or manpower to do a thorough audit, so they looked at just five large airports: Miami-Dade (FL), Detroit Metro (MI), San Antonio (TX), Allegheny County (Pittsburgh), and Cleveland (OH). There are some big "cracks" in the FAA's system, that apparently allow too much to "fall through."

What they found wasn't pretty: "At a sample of five airport sponsors reviewed, we found approximately $40.9 million in potential revenue diversions that were not detected by FAA's primary oversight methods. This amount includes about $39 million that was not detected by independent auditors during single audit work, and $1.74 million that was not disclosed by airport sponsors in airport financial reports. These amounts were not detected because independent auditors of airport sponsors were not sufficiently aware of relevant Office of Management and Budget (OMB) guidance on auditing airport revenue, and airport sponsors were not adhering to FAA policies on requirements for airport financial reports."

Auditors encouraged but reticent.

The Office of the Inspector General says that, if what's promised is delivered, things should get better: "Since we completed our field work, FAA has also taken steps to improve airport financial reporting processes... In our opinion, the actions taken by FAA and AICPA should improve FAA's ability to detect and prevent airport revenue diversions." The OIG warns, "The key to success now lies in implementation and follow-through on the part of FAA and AICPA."

"We have brought the issue of the diversion of funds to the Federal Aviation Administration's attention," said David Barnes, a spokesman for the inspector general's office. "Now, the FAA has to conduct an investigation..." Oh, boy.

FMI: www.oig.dot.gov/show_pdf.php?id=1053