GAO Report to the Chairman, Subcommittee on Environment, Energy, and Natural Resources, Committee on Government Operations, House of Representatives January 1990 DEPARTMENTOF THEINTERIOR Bureau of Reclamation Aircraft Should Be Centrally Managed Like Other Interior Aircraft GAO/M;D-90-N . . United States General Accounting Office Washington, D.C. 20548 General Government Division B-231245.6 January 18, 1990 The Honorable Mike Synar Chairman, Subcommittee on Environment, Energy, and Natural Resources Committee on Government Operations House of Representatives Dear Mr. Chairman: This report responds to your request that we examine the Bureau of Reclamation’s management and administrative use of government air- craft. As agreed, we focused on aircraft that are configured and used primarily for transportation services similar to those provided by com- mercial airlines and by rental, lease, and charter businesses. You asked whether Reclamation, an agency of the Department of the Interior. was complying with the aircraft ownership, management, and administra- tive use policies of Office of Management and Budget (OMB) Circulars A- 76 and A-126. You also asked whether there are any reasons why Recla- mation’s aircraft should not be owned and centrally managed by the Department of the Interior’s Office of Aircraft Services (0~s) like most other Interior aircraft. Because Reclamation’s aircraft management practices were similar to those we found at other civilian agencies and reported to you in a recent overall report’ , and as agreed with the Subcommittee, this report focuses primarily on the issue of whether Reclamation aircraft should be centrally owned and managed by 0~s. OMB Circular A-76, “Performance of Commercial Activities,” states that the government’s general policy is to rely on commercial sources to sup- ply the products and services it needs, including aircraft and aircraft services, when it is more economical to do so. It requires agencies to justify government performance of such commercial activities through cost studies demonstrating that government performance is less costly than commercially available services. The supplement to circular A-76 provides a methodology for agencies to use in doing these cost studies. OMB Circular A-126, “Improving the Management and Use of Govern- ment Aircraft,” prescribes policies executive agencies are to follow in ‘Government Civilian Aircraft: Central Management Reforms Are Encouraging But Requre Extawve Oversight (GAO/GGD89-86, Sept. 29, 1989). Page 1 GAO/GGD+W20 Reclamation A&aft B231245.6 Our objectives were to (1) evaluate Reclamation’s aircraft ownership, Objectives, Scope,and management, and administrative use practices, particularly its compli- Methodology ance with OMB Circulars A-76 and A-126 and (2) determine whether there are any reasons why Reclamation aircraft should not be owned and centrally managed by OM like most other Interior aircraft. As of September 1, 1988, Reclamation operated a total of 11 aircraft- 10 government-owned and 1 leased. As agreed with the Subcommittee, our evaluation focused on five aircraft-two Gulfstream Commanders. two Rockwell Commanders, and a Cessna-that Reclamation used for administrative travel such as transporting employees and other official and non-official passengers to remote work sites, meetings, and other functions. The five aircraft were operated by four Reclamation regional offices-the Upper Colorado Region in Salt Lake City, Utah; the Lower Colorado Region in Boulder City, Nevada; the Missouri Basin Region in Billings, Montana; and the Pacific Northwest Region in Boise, Idaho. In carrying out our work, we (1) examined Reclamation cost records, air- craft flight logs, passenger lists. and other data relating to the owner- ship and management of the five aircraft for fiscal year 1988 and (2) discussed these data and Reclamation’s management practices with Inte- rior and Reclamation headquarters and regional officials. To determine why Reclamation chose to exclude its aircraft from the OAS fleet and whether those reasons are compelling, we examined documen- tation on Reclamation’s decision and discussed that decision with responsible officials of the Department of the Interior in Washington, D.C.; OAS in Boise, Idaho; Reclamation headquarters in Denver, Colorado; and the four Reclamation regions. We met with OAS and Reclamation officials to determine what services OAS presently provides to Reclama- tion, what services Reclamation pays for, and the cost and benefit impli- cations of making Reclamation aircraft part of the OASfleet. Finally, we coordinated our findings with the House and Senate appropriations sub- committees that have jurisdiction over these agencies. We did our work between March 1988 and November 1989 using gener- ally accepted government auditing standards. Views of responsible agency officials are included where appropriate. However, in accord- ance with the Subcommittee’s wishes, we did not obtain written com- ments on a draft of this report. Page 3 GAO/GGD9020 Reclamation Airaft 8231246.6 by-flight cost comparisons because they were unaware of the Circular A- 126 requirements. According to these officials, neither Interior, OAS, nor Reclamation headquarters notified them of the Circular or issued any implementing guidance or regulations for them to use in managing their aircraft. Although the regions did not fully comply with the aircraft justification policies of Circular A-l 26, they had done aircraft studies. Two regions did A-76 cost analyses in 1982 and 1983 when they acquired new air- craft. Another region that wanted to convert from a leased aircraft to a government-owned aircraft had OM do a cost analysis in 1984. Because of the time that had elapsed since the studies were made, we did not attempt to validate the study results. Interior’s Office of the Assistant Secretary for Policy, Budget, and Administration has overall responsibility for departmental leadership and coordination of aviation management policies, procedures, and prac- tices. Interior assigned to OASthe responsibility for establishing policies to guide all Interior aviation operations. However, OASdid not notify Interior offices and bureaus about OMB Circular A-126 following its issu- ance in October 1983 or issue any regulations or other guidance to implement the circular. An OASofficial said that he drafted implement- ing policy guidance but could not recall why it was never issued. Also. Interior officials we contacted could not explain why Interior did not follow up on the lack of guidance or ensure that Reclamation’s aircraft management practices were consistent with OMB policies. However, OAS, on October 3, 1989, issued guidance to implement OMB'S January 1989 revision to Circular A-126. Regions Lacked Complete Resides prescribing policies for justifying government aircraft and their Aircraft Management Data use for administrative travel, OMB Circular A-126 requires that agencies maintain accounting systems that accurately and completely account for to Do the Required all aircraft costs. Without complete cost data, agencies cannot do the Analyses cost-effectiveness determinations required by OMB Circulars A-76 and A- 126. None of the regions accounted for all aircraft costs. Generally, the regions accounted for aircraft fuel, maintenance, hangar, and deprecia- tion costs, and labor costs such as pilots’ salaries and benefits. However, only one region allocated administrative overhead costs to its aircraft operations. None of the regions recorded, as annual costs, reserves for accident damage (insurance) or for major maintenance costs. The Page6 GAOGGD9E20 Reclamation Abaft 5231245.6 report, we recommended, among other things, that (1) OMB require each civilian agency with substantial aircraft needs to establish a central office responsible for aircraft management and oversight and (2) the General Services Administration (GSA) establish and operate a govern- mentwide aircraft management information system similar to the one operated by OAS. In response to our recommendations, OMB issued Circular A-126, “Improving the Management and Use of Government Aircraft,” in Octo- ber 1983. It contained some of the policy guidance and procedures we recommended, including a policy that agencies establish clear accounta- bility for aircraft management at a senior management level and assign responsibility for implementing the Circular to a senior official. Also in response to our recommendations, GSA implemented a governmentwide aircraft management information system in February 1985. In an April 1984 report-’ we pointed out that OASwas established to man- age all Interior aviation resources, but Interior had only given OAS these responsibilities in Alaska. We recommended that the Secretary of the Interior direct OASto assume ownership and overall management of all departmental aircraft, aircraft facilities and equipment, and aviation- related personnel managed by other Interior offices and bureaus. OAS Now Owns and As of October 27, 1989, the Department of the Interior owned or leased Centrally Manages Most a total of 86 aircraft. Of these, 73 were centrally managed by OAS (OAS fleet aircraft); 2 were managed by the National Capitol Park Police in Other Interior Aircraft Washington, D.C.; and 11 were managed by the Bureau of Reclamation. While 0~s owns or leases the 73 fleet aircraft, individual Interior offices and bureaus maintain day-to-day operational control of 71 of the 73 air- craft; OAScontrols and uses the other 2 aircraft. Besides owning most of Interior’s aircraft, OAS provides certain central- ized aviation support services to all Interior offices and bureaus, includ- ing Reclamation. These services include (1) developing, implementing, and maintaining departmental aviation policies and standards governing aircraft operations, maintenance and aircrew qualifications, and profi- ciency; (2) procuring aircraft and charter and rental services and pro- viding technical assistance to offices and bureaus upon request; (3) evaluating departmentwide aviation safety and providing aviation ‘Actions Taken to Improve Management and Reduce Costs of Interior’s Arcraft Operations and Fur- ther Improvements Need&. (GAO/FS’kD-84 - 45 1Apr. 2, 1984). Page? GAO/GGD9@20 Reclamation Airaft 5231245.6 Table 1: Sources of OAS’ Funding for Fiscal Year 1969 Sources Amount Approprlattons $1,813,000 User fee-s .-__ Commercial alrcraft charters and rentals 1 011 000 Commercial matntenance contracts --__ 2,826,OOO Other reimbursable serwces -__ 241,000 Other . admlnlstratwe fees for the fleet atrcraft 426,000 Total 66.317.000 According to the Chief of 0~s’ Management Services Div’sion, the existing OAS system, including personnel as well as administrative sup- port equipment, could accommodate additional fleet aircraft. He said that adding Reclamation’s 11 aircraft to the OAS fleet would likely result in only minimal increases in OAS’ operating costs. If Reclamation aircraft were part of the OAS fleet, Reclamation, like other Interior offices and bureaus, would pay a prorata share of OAS’ operating costs that are not otherwise covered by appropriations and user fees. Reclamation’s Rationale Reclamation joined OAS’centralized fleet system in October 1985 but was for Owning and Managing allowed out after only 9 months. Reclamation’s reasons for wanting out were that (1) its funding for operations, including aircraft, falls within Its Own Aircraft the jurisdiction of a different appropriations subcommittee than other Interior offices and bureaus and (2) it believed that its aircraft operat- ing costs were higher under OAS ownership. We do not believe these are compelling reasons for excluding Reclamation aircraft from the OAS fleet. Recfamation’s funding comes under the jurisdiction of the House and Senate Appropriations Subcommittees on Energy and Water Develop- ment. Appropriations for all other Interior offices and bureaus are under the jurisdiction of the House and Senate Appropriations Subcom- mittees on Interior and Related Agencies. Interior, Reclamation, and OAS officials could not identify why or how the appropriation jurisdictional differences were or would be an impediment to Reclamation aircraft being part of the OAS fleet. Presently, Reclamation receives or has access to, most of OAS’ aviation support services. However, Reclamation helps finance OASoperating costs only when it rents or charters commercial aircraft through OAS, contracts for maintenance through OAS, or obtains other special services page9 GAO/GGD9020ReclamationAircaft 6-231245.6 government-owned and leased aircraft and in-house provision of air- craft operations by .July 3 1, 1989. Although no federal agency met the July 31, 1989 deadline, the requirement to make the analyses is still in effect. Effective January 18. 1989, OMB revised its Circular A-126 to (1) clarify certain ambiguities in its aircraft management policies and to strengthen the interrelationship of Circulars A-76 and A-126; (2) incorporate cost- accounting guidance and standard aircraft program cost elements for agencies to use in complying with the justification and cost-effectiveness requirements of Circulars A-76 and A-l 26; (3) establish a govern- mentwide leadership, technical assistance, and supporting oversight role for GSA in the aircraft area; and (4) provide for more OMB oversight of agencies’ aircraft management practices. In view of the shortcomings in Reclamation’s accounting system for air- Conclusions craft costs and its noncompliance with the earlier version of OMB Circu- lar A- 126, we believe that Reclamation’s capability to comply with OMB'S revised aircraft management policies would be enhanced if its aircraft were part of the OASfleet. OAS recently issued guidance to implement OMB'S revised aircraft management policies within Interior. Its cost accounting system for the fleet aircraft provides the data needed to comply with OMB‘S aircraft ownership, management, and administrative use policies. Iiotwithstanding the fleet aircraft issue, sustained depart- mental oversight would be helpful in holding Reclamation accountable for complying with OMDpolicies. To better ensure that Reclamation aircraft and aircraft operations are Recommendations to cost effective, we recommend that the Secretary of the Interior require the Secretary of the (1) Reclamation to place its aircraft into the OAS fleet and seek oti’ assis- Interior tance in managing them and (2) Interior’s Assistant Secretary for Policy, Budget, and Administration to oversee Reclamation’s compliance with OMB'S aircraft management policies. As arranged with the Subcommittee, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will provide copies to the Secretary of the Interior, Director of OMB, Administrator of GSA, Page 11 GAO/GGD-9020 Reclamation A&aft Page 13 GAO/GGDOO-20 Reclamation Alrcaft Major Contributors to This Report .John M. Lovelady. Assistant Director General Government Government Business Operations Issues Division, Washington, Robert B. Mangum. Assignment Manager Diane Dawes. Typist D.C. Jeffrey Forman, Attorney Office of General Counsel, Washington, D.C. -\ Billie J. North, Regional Management Representative Denver Regional Paul S. Begnaud, Evaluator-In-Charge Office Alan J. Wernz. Evaluator (014025) Page 14 GAO/GGDSO-20 Reclamation Aircaft 8221245.6 Commissioner of the Bureau of Reclamation, Director of OAS,other con- gressional committees and subcommittees that have an interest in this matter, and to other interested parties upon request. If you have questions about this report, please call me on 275-8676.GAO staff members who made major contributions are listed in the appendix. Sincerely yours, L. Nye Stevens Director, Government Business Operations Issues Page 12 GAO/GGD6W26 IlecLnution Ahaft El-23 1246.6 from QAS.Since Reclamation aircraft are not part of the OAS fleet, Recla- mation does not help pay OAS’ operating costs that are not covered by direct appropriations and user fees. Also, we noted that Reclamation sometimes chartered or leased aircraft directly from OAS’commercial vendors, at the prices OM negotiated with those vendors, and, thus, avoided the OAS user fees. Reclamation officials expressed a desire to keep aircraft costs as low as possible because such costs are allocated among various water projects and reimbursed by local water districts. Reclamation officials said that they were concerned that the water districts would question any higher costs associated with 0~s ownership of Reclamation aircraft. Because of these concerns, Reclamation compared the costs of owning and operat- ing its own aircraft with the costs it would incur if its aircraft were part of the 0~s fleet. Reclamation’s analysis, made in 1985, indicated that its costs would be higher under the OAS system. However, Reclamation understated the actual costs of owning and operating its own aircraft because its cost analysis did not include administrative overhead, acci- dent reserves, or major maintenance reserves. OAS recognizes and charges these costs to the fleet aircraft, but Reclamation does not. ’ Because of these unrecognized costs and the administrative fees associ- ated with 0~s’ operations, Reclamation’s costs charged to aircraft opera- tions would probably be higher in the short-term if its aircraft were made part of the OASfleet. However, we believe that these costs would more accurately reflect the actual costs of Reclamation’s aircraft opera- tions. Over the long-term, we believe that making Reclamation aircraft part of the OAS fleet would result in cost savings through improved air- craft management. By providing more complete cost data on Reclama- tion aircr:sft and better utilizing oti’ aircraft management expertise, such an arrangement should better ensure that Reclamation aircraft are operated and used cost-effectively. Recent OMB Actions Make During the course of our work at Reclamation, OMB made certain changes Cost-Effective in the governmentwide aircraft ownership, management, and use poli- ties. The OMB policy changes, made in response to GAO and Inspectors Management of General findings at several other federal agencies, place more emphasis Reclamation Aircraft More on aircraft cost analyses and flight-by-flight cost comparisons. Critical In a November 15, 1988, memorandum, OMB directed agencies to com- plete special A-76 cost analyses to justify the cost-effectiveness of all Page 10 GAO/GGD+W20 Reclamation Aircaft 8231245.6 safety training; and (4) contracting for commercial aircraft services and aircraft maintenance. Additionally, OAS provides certain centralized aviation support services to other Interior offices and bureaus but not to Reclamation. These ser- vices include (1) coordinating use of the fleet aircraft under the opera- tional control of other Interior offices and bureaus to maximize their utilization and (2) prescribing the procedures for justifying, budgeting, and managing the financial aspects of the fleet aircraft, including air- craft acquisition, aircraft billings and payments, aircraft cost account- ing, and the aircraft management information system. Through its cost- accounting system, OAScollects, and makes available to other Interior offices and bureaus, data on the costs of operating the fleet aircraft such as fuel, regular and unscheduled maintenance, and reserves for major overhaul and accidental damage. Interior offices and bureaus need such cost data to make the A-76 cost analyses and the A-l 26 flight- by-flight justification cost comparisons. As table 1 shows, OAS’ operations are financed through a combination of appropriated funds, user fees, and other administrative fees. Interior receives direct appropriations for some of the aircraft services OAS pro- vides to all Interior offices and bureaus. As a part of its centralized departmental program, OAS procures commercial aircraft services-air- craft charters, rentals, and maintenance contracts-through a working capital fund arrangement and charges user fees to Interior offices and bureaus as well as other federal agencies who use those commercial ser- vices. Like other Interior offices and bureaus, Reclamation finances a portion of OAS’ operating costs through these user fees when it rents or charters aircraft or contracts for aircraft maintenance services through OAS. During fiscal year 1989, for example, Reclamation spent $920,000 for such commercial aircraft services it obtained through OAS.OAS’ oper- ating costs that are not funded by appropriations or user fees are cov- ered by other administrative fees charged to the Interior offices and bureaus that have operational control over the fleet aircraft. Page 8 GAO/GGD-9020 Reclamation Aircaft B231245.6 regions recorded costs for major maintenance as one-time charges in the year paid rather than amortize them over the remaining estimated flight hours of the aircraft. Regions were also inconsistent in their treatment of aircraft useful life and residual or salvage value for depreciation pur- poses. Unlike Reclamation, OAS' cost accounting system for the fleet air- craft, consistent with OMR Circular A- 126 as revised in .January 1989, accounts for all these costs (see p. 10 of this report). We found no compelling reasons for Reclamation to own and manage its OASOwnership of aircraft independently of OAS. To the contrary, we believe that making Reclamation Aircraft Reclamation aircraft part of the OAS fleet would better ensure that Rec- lamation aircraft are operated and used cost-effectively. Offers Opportunity for Improved Management Our Past Reports Have In three earlier reports, we concluded that Interior’s limited efforts to centralize control over departmental aircraft through OAS had been Endorsed the OAS Concept effective. For example, in an October 1981 report’ we concluded that Interior was achieving important benefits from OAS’ centralized aircraft management in the areas of contracting effectiveness, safety, manage- ment information, flight coordination, and cost savings. We also con- cluded that individual Interior offices and bureaus could not provide these services as cost-effectively as OAS. In a June 1983 report’ we concluded that OAS had very effectively man- aged a number of Interior’s aircraft operations by establishing uniform aircraft policies and procedures, an aircraft management information system that included a cost accounting system, and a safety program. We reported that a further indication of OAS’ effectiveness and potential broader application of its services was that some non-Interior agencies had benefitted from using OASservices. On the basis of our work at OAS, we concluded that civilian agencies, in which multiple organizations required substantial aircraft services, needed an aircraft office, such as OAS, to serve as a focal point for overall aircraft management. We also concluded that the OAS aircraft management information system could serve as a model for a much needed governmentwide system. In that ‘The Department of the Interior’s Office of Aircraft Services Should Xot Re abolIshed (GAO/ PLRD82-5, Oct. 7,1981) ‘Federal Civilian A encies Can Better Manage Their Arcraft and Helated Services (GAO/ ~83-64,.hne~4. 1983). Page 6 GAO/GGB9020RdamationAircaft B-231245.6 Reclamation was not complying with OMB Circulars A-76 and A-126, Reclamation Not which are designed to ensure that agencies’ aircraft operations are justi- Complying With OMB fied and cost effective. Aircraft Policies The four regions we reviewed owned, operated, and used their aircraft for administrative travel without adequately considering whether com- mercial alternatives might be more economical. The regions were not doing (1) annual cost analyses required by OMB Circular A-126 to justify the continuing need for, and cost-effectiveness of, their aircraft and in- house aircraft operations or (2) valid flight-by-flight cost comparisons to determine whether use of their aircraft for administrative travel w’as cost-effective. Also, the regions lacked complete cost data to determine whether their use of aircraft was cost effective. The regions were not familiar with OMB’S aircraft management policies. Neither Interior nor Reclamation had (1) notified the regions of the OMB Circular A-126 requirements, (2) issued implementing policies or guide- lines for the regions to use in managing their aircraft, or (3) followed up to determine if the regions were complying with the governmentwide policies. Regions Lacked Policies OMB Circular A-126 required agencies to annually review and rejustify and Oversight to Ensure the continuing need for, and cost-effectiveness of, their government air- craft and in-house aircraft operations. It also required agencies to jus- Cost-Effectiveness tify any administrative use of government aircraft by showing that the variable costs of using the aircraft are not more than the costs of com- mercial alternatives. At Reclamation, we found that three of the four regions had not done the required annual reviews of their aircraft or aircraft operations. Also, we found that the regions had not done valid flight-by-flight cost comparisons to justify administrative usage of their aircraft. Some regions did not do the required flight-by-flight comparisons while other regions said that they did cost comparisons but did not document them. The cost comparisons available for our review did not consider all rele- vant aircraft costs. We noted instances in which the regions used the government aircraft for administrative travel even though their cost comparisons, which did not include all relevant costs, indicated that usage was not cost effective compared to commercial alternatives. Regional officials said that they did not do annual reviews of their air- craft and aircraft operations and did not do or properly document flight- Page 4 GAO/GGD9020 Reclamation Aircaft B-231245.6 acquiring, managing, using, and accounting for the costs of government aircraft. Basically, it requires agencies to do cost analyses to justify (1) the continuing need for government aircraft and the cost-effectiveness of in-house aircraft operations and (2) flight-by-flight use of government aircraft for administrative travel, i.e., passenger transportation or other administrative support purposes. Within the Department of the Interior, OASwas established in 1973 to centrally manage all departmental aviation resources. OAS presently pro- vides certain management support services to all Interior offices and bureaus. Individual offices and bureaus have day-to-day operational control of their aircraft, however, OAS owns or leases and centrally man- ages all Interior aircraft except those operated by Reclamation and the National Park Police. Reclamation participated in OM’ centralized sys- tem from October 1985 until June 1986. Reclamation was allowed out of the OASsystem after only 9 months because (1) funding for its opera- tions, including aircraft, comes under the jurisdiction of a different con- gressional appropriations subcommittee than other Interior offices and bureaus and (2) it believed its operating costs were higher under OAS ownership. Reclamation now owns and manages its aircraft indepen- dently of OAS. Reclamation does not know whether its aircraft operations are cost- Results in Brief effective because it has not complied with OMB policies designed to ensure that the ownership, operation, and administrative use of govern- ment aircraft are more economical than commercial alternatives. The four regions we reviewed had not done the required cost analyses to justify the continuing need for, and cost-effectiveness of, their aircraft and in-house aircraft operations. Also, the regions had not done valid flight-by-flight cost comparisons to justify the use of their aircraft for administrative travel. The regions’ noncompliance with OMB aircraft management policies stemmed from inadequate guidance and oversight by Interior and Reclamation headquarters and from inadequate and incomplete cost data on their aircraft. We found no compelling reasons why Reclamation should own and oper- ate its aircraft independently of OAS. To the contrary, making Reclama- tion aircraft part of the OAS fleet should better ensure that aircraft operation and use are cost-effective and that Reclamation has complete and accurate cost data to comply with OMB'S aircraft management direc- tives and policies. Such an arrangement would also better utilize 0.~’ aircraft-management expertise. Page2 GAO/GGD9@20 Reclamation A&aft
Department of the Interior: Bureau of Reclamation Aircraft Should Be Centrally Managed Like Other Interior Aircraft
Published by the Government Accountability Office on 1990-01-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)