FAA Made $161 Million in Improper Payments in Fiscal 2008, Inspector Says

The U.S. Federal Aviation Administration made about $161 million in improper payments for airport projects in fiscal 2008, or about 5 percent of $3.2 billion in grants the agency distributed, an inspector general’s report found.

Nearly half of payments were for ineligible services or recipients, the wrong amounts or duplications, according to the Transportation Department inspector general report. The rest was for work not sufficiently documented, according to the report released today in Washington. The FAA disputed the results.

The improper payments are “unacceptable, and the FAA must take immediate, strong steps to ensure they do not occur,” Representative Jerry Costello, an Illinois Democrat who is chairman of the House aviation subcommittee, said in a statement. Airport funds “must not be wasted.”

The report places congressional scrutiny on an FAA program that President George W. Bush’s administration’s attempted to cut for four straight years, most recently in 2008, when he sought to reduce its funding to $2.75 billion from $3.5 billion. Congress rejected the cuts each time.

“We strongly disagree” with calculations in the report, the FAA said in an e-mailed statement. “We have determined that the vast majority of these payments were made properly.”

Performance Bonuses

The inspector general’s office reached its conclusion after examining $251 million in payments to 26 grant recipients in the Airport Improvement Program in 2007 and 2008. Auditors said they found $13.1 million in improper payments to 17 recipients. The agency then estimated the overall amount of improper payments through statistical sampling, according to the report.

Airports use the money under the program to build runways, resurface taxiways and for other capital projects. The federal government collects the funds from taxes on airline tickets, jet fuel and other aviation items, and then distributes it to airports based on the number of passengers they handle and their construction needs.

The Memphis-Shelby County Airport Authority in Tennessee received $680,000 for performance bonuses, which are prohibited by FAA regulations, according to the report. The Panama City-Bay County International Airport in Florida overbilled FAA by $122,000 on one grant, according to the inspector.

Documentation Gaps

Farmington, New Mexico, requested and received an electronic payment of $434,000 from the FAA, only to request a manual distribution for the same amount a week later and receive it. The FAA recovered the extra payment after being informed of the error by the grant recipient, the report showed.

Santa Barbara, California, received $124,700 for pipe drain installations and couldn’t provide the inspector records to support claims that the work was completed, the report showed.

According to the FAA statement, an independent team reviewed payments made in 2009 and 2010 and found a continued decrease in the number of distributions made without complete documentation.

To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net.

To contact the editor responsible for this story: Bernie Kohn at bkohn2@bloomberg.net.

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