Summary: In recent years, Congress has raised concerns about cost growth in the Federal Aviation Administration's (FAA) operating budget. Appropriators noted several expenses in FAA's fiscal year 2004 facilities and equipment (F&E) account budget submission that appeared to be ongoing operating expenses. The House and Senate appropriations subcommittee reports on FAA's fiscal year 2004 budget submission highlighted 17 such budget items and recommended that the expenses for these items either be transferred to the operations budget or not receive funding. As a result of these concerns, the Conference Report accompanying the fiscal year 2004 Omnibus Appropriations Act directed us to conduct an audit of FAA's policies and practices for determining whether an expense should be budgeted in its operating accounts or in the capital account. Specifically, this report addresses the following questions: (1) What are FAA's policies for determining whether an expense--including personnel compensation, benefits, travel, and related expenses--belongs in its capital (F&E) or Operations accounts? (2) How did FAA implement its policies for determining whether 17 specific budget line items identified by appropriators belong in its F&E or Operations accounts, including personnel compensation, benefits, travel, and related expenses? (3) How do FAA's budget policies compare with those of other civilian agencies with large acquisition budgets, such as the National Aeronautics and Space Administration (NASA) and the Department of Defense (DOD)?
In summary, FAA Order 2500.8A contains the agency's policies for assigning budget expenditures to the F&E, Operations, and Research, Engineering, and Development (RE&D) accounts. In reviewing this order, we found that it is outdated and unclear and that the linkages between FAA's policies and the assignment of budget line items to the F&E and Operations accounts are very general. In addition, the order is not structured by organizational objectives (performance goals), as is part of FAA's fiscal year 2004 budget estimate for F&E. This structural difference makes it difficult to compare the F&E portion of the budget submission with FAA's policies. Additionally, the order lacks the level of detail needed for both FAA officials and appropriators to easily distinguish between F&E (capital) and Operations expenditures. The order also does not reflect FAA's current process for acquiring goods and services (acquisition management), which influences whether an expenditure for a project is categorized as an F&E or an Operations expense. According to our analysis, while FAA's policies for categorizing expenses are very broad and give the agency wide latitude, FAA followed the policies outlined in its 1993 order for the majority of the 17 budget line items identified by the appropriators in FAA's fiscal year 2004 budget submission. FAA concurred with the appropriators that 5 of these budget line items should have been categorized as Operations expenses and said that it would restructure the items in its next budget submission; however, the agency maintained that the remaining 12 items were appropriately categorized as F&E expenses and cited specific agency policies to support the items' placement there. Although FAA's policies for assigning budget line items to the F&E and Operations accounts are very general, our analysis generally supported FAA's categorizations. FAA's budget policies cannot readily be compared with those of NASA and DOD. While the policies of all three agencies use similar budgetary language, the policies cannot be compared in detail because the agencies use different budgetary approaches. Each agency independently developed its own budget format in response to the current administration's direction that federal agencies develop performance-based budgets.
