1. Presented to: 33 th Annual Airport Conference Hershey, PA By: Tom Felix Date:March 4, 2010 Federal Aviation Administration AUDITS OF AIP & ARRA PROJECTS

2. 2 Federal Aviation Administration 2 American Recovery and Reinvestment Act (ARRA) ARRA provided $1 billion for airport development Funds were allocated to “shovel ready” projects Project chosen based on existing FAA priority system Funds allocated following nationwide historical AIP distribution

3. 3 Federal Aviation Administration 3 American Recovery and Reinvestment Act (ARRA) ARRA included requirement for monthly and quarterly reporting on project progress and job creation Funds must be awarded within one year after enactment of the legislation (February 2010) Project must be completed within 2 years of enactment of the legislation ( February 2011) FAA was ahead of the other agencies DOT. FAA obligated 100% of ARRA funds by September 30, 2010

4. 4 Federal Aviation Administration 4 OIG Audits of ARRA Office of Inspector General (OIG) visited all 9 FAA regions to evaluate –Process of selecting projects –Adherence to existing FAA policies –Oversight of ARRA projects

5. 5 Federal Aviation Administration 5 OIG Audits of ARRA OIG is currently auditing 27 projects nationwide Transparency in Bid advertising and award Adherence to contract requirements Project inspection and monitoring Payment documentation Accuracy of job reporting

6. 6 Federal Aviation Administration 6 IMPROPER PAYMENT INFORMATION ACT (IPIA) AUDITS Objective is to evaluate whether or not the FAA has adequate controls to prevent and Detect improper payments to AIP grant recipients

7. 7 Federal Aviation Administration 7 IMPROPER PAYMENT INFORMATION ACT (IPIA) OMB Circular 123 defines an improper payment as any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. - Incorrect amounts are overpayments and underpayments (including inappropriate denials of payment or service). -An improper payment includes any payment that was made to an ineligible recipient or for an ineligible service, duplicate payments, payments for services not received, and payments that are for the incorrect amount. -In addition, when an agency’s review is unable to discern whether a payment was proper as a result of insufficient or lack of documentation, this payment must also be considered an error. -The term “payment” in this Circular means any payment (including a commitment for future payment, such as a loan guarantee) that is derived from Federal funds or other Federal sources; ultimately reimbursed from Federal funds or resources; or made by a Federal agency, a Federal contractor, a governmental or other organization administering a Federal program or activity. See Appendix C to OMB Circular A-123 (2006).

8. 8 Federal Aviation Administration 8 IPIA AUDITS Stage 1 Consist of selecting a sample of federal payments to sponsors from the population of all AIP payments made within a specified fiscal year.

9. 9 Federal Aviation Administration 9 IPIA AUDITS Stage 2 Consist of indentify sponsor payment supporting the stage 1 selection of federal payments. The sponsor will provide list of all payments to contractors and internal charges associated with the federal payment(s) in Stage 1

10. 10 Federal Aviation Administration 10 IPIA AUDITS Stage 3 Consist of selecting line items on invoices supporting the sponsor payments selected in stage 2. The improper payments review test procedures will be performed on selected items.

11. 11 Federal Aviation Administration 11 10% RETAINAGE Airport sponsors must not draw down AIP grant funding for the full 100% of a construction invoice unless the airport sponsor has paid the contractor for the 10% retainage. An airport sponsor pays the contractor the 10% retainage when it pays the contractor either the full 100% due on the construction invoice, or when the airport sponsor pays the contractor 90% of the amount due and pays the 10% retainage into a bonafide escrow account. The escrow will be disbursed to the contractor by a third party under the conditions of the escrow (e.g. satisfactory completion of work). See 49 CFR 18.21(g)(3). An airport sponsor who draws down the full amount of a construction invoice without paying the contractor for the 10% construction retainage in full or by escrow, is in violation of the Federal Regulation, and sponsor assurances, and is subject to grant compliance action.