Passenger Facility Charge Audit Guide for Air Carriers Procedures for Examining Air Carrier Passenger Facility Charge Collection, Remittance, and Reporting Practices

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Passenger Facility Charge Audit Guide for Air Carriers--

Procedures for Examining Air Carrier Passenger Facility Charge

Collection, Remittance, and Reporting Practices

AGENCY: Federal Aviation Administration, Department of Transportation.

ACTION: Notice of availability; Request for comments.

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SUMMARY: The Federal Aviation Administration (FAA) is issuing interim

guidance for conducting annual audits of air carrier Passenger Facility

Charge (PFC) collection, remittance, and reporting practices. An air

carrier collecting PFC's from at least 50,000 passengers annually is

required to provide for an annual audit of its PFC accounts by an

accredited independent public accountant. An auditor engaged to audit

the air carrier's PFC accounts is required to report ``on the fairness

and reasonableness of the carrier's procedures for collecting, holding,

and dispersing PFC revenues.'' In addition, an auditor is required to

report whether the quarterly reports of PFC accounts that the air

carriers must provide to airports ``fairly represent the net

transactions in the PFC account.''

The interim guidance is issued for a one-year review and comment

period. It is intended that this interim guidance be used for air

carrier PFC audits will final guidance is issued, which will occur

after the evaluation and disposition of comments from the review

period. Use of the interim and final guidance is voluntary, although

the FAA will have greater confidence in audits conducted in accordance

with the guide.

Interested parties may access the Passenger Facility Charge Audit

Guide for Air Carriers through the Internet at http://www.faa.gov/arp/

audit.htm. Alternatively, the guide may be obtained by contacting the

individual listed below under the heading FOR FURTHER INFORMATION

CONTACT.

DATES: Interim guidance effective August 17, 1999; Comments must be

submitted must be submitted on or before August 16, 2000.

ADDRESSES: Comments should be mailed, in triplicate, to Federal

Aviation Administration, Airports Financial Assistance Division,

Attention: Passenger Facility Charge Branch (APP-530), 800 Independence

Avenue, S.W., Room 619, Washington, DC 20591.

FOR FURTHER INFORMATION CONTACT: Joseph Hebert, Program Analyst,

Passenger Facility Charge Branch, Airports Financial Assistance

Division (APP-530), Federal Aviation Administration, 800 Independence

Avenue, S.W., Washington, DC 20591, (202) 267-3845.

SUPPLEMENTARY INFORMATION: Title 49, USC, Section 40117, authorizes the

Secretary of Transportation (further delegated to the FAA

Administrator) to approve the local imposition of a PFC of $1, $2, or

$3 per enplaned passenger for use on certain airport projects. On May

29, 1991, the FAA issued 14 CFR Part 158 outlining policies and

procedures for the PFC program. Under Part 158, public agencies

controlling commercial service airports can apply to the FAA for

authority to impose a PFC for use on eligible projects. The proceeds

from such PFC's are to be used to finance approval, eligible airport-

related projects.

Once a public agency's application for the imposition of a PFC is

approved by the FAA, it must notify air carriers and foreign air

carriers required to collect PFC's at its airport(s) of the approval.

Once notified, an air carrier is required to collect PFC's on tickets

it issues showing an enplacnement at that airport (with certain

exceptions). The air carrier is also required to notify its agents,

including other issuing carriers, of the collection requirements. Air

carriers or their agents collect PFC's from passengers on behalf of the

public agency at the time of air travel ticket (or its equivalent)

issuance. Air carriers are responsible for all PFC funds from the time

of collection to remittance to the public agency and must provide

quarterly reports to the public agency showing the total amounts of PFC

revenue collected and refunded, as well as any amount withheld by the

air carrier as collection compensation in accordance with section

158.53 of Part 158. For the purposes of an audit under section 158.69,

collection is defined as the point when agents or other intermediaries

remit PFC revenue to the carrier.

An air carrier collecting PFC's from at least 50,000 passengers

annually is required to provide for an annual audit of its PFC accounts

by an accredited independent public accountant. The audit shall be made

available to the public agency, upon request. Although not specifically

required by the regulation, the audit should also be submitted to the

FAA, upon request. Auditors engaged to audit the air carrier's PFC

accounts are required to report `` on the fairness and reasonableness

of the carrier's procedures for collecting, holding, and dispersing PFC

revenues.'' In addition, auditors are required to report whether the

quarterly reports of PFC accounts that the air carriers must provide to

airports ``fairly represent the net transactions in the PFC account''

(section 158.69(b)(1) of Part 158). The FAA expects these audits to be

filed in a timely manner and should normally coincide with the

carrier's fiscal year and annual corporate audit cycle.

To facilitate the conduct of audits that meet the requirements of

the statute and regulation, the FAA has prepared the Passenger Facility

Charge Audit Guide for Air Carriers. The procedures contained in the

guide for testing and reporting on PFC's collected, withheld, refunded/

exchanged, and remitted during the year are intended to assist the

auditor in accomplishing the audit and internal control structure

attestation. This guide is not intended to supplant the auditor's

judgment of procedures to be performed. The auditor should use

professional judgment to tailor the procedures so that the audit

objectives are achieved. However, the auditor must address all

applicable internal control requirements.

The interim guidance describes the collection, remittance, and

reporting requirements of 14 Code of Federal Regulations (CFR) Part 158

(the implementing regulation for Title 49, United States Code (USC),

Section 40117, that established PFC authority) in a requirements-

objective-procedure format. This format is similar to that used in the

FAA Airport Improvement program supplement to OMB Circular A-133 and

should appear familiar to auditors.

The guide also relies on the testing of nonstatistical samples of

lifted tickets or equivalent records as an agreed-upon procedure for

providing an airport-level assessment of air carrier compliance with

part 158 collection and remittance requirements. An air carrier

utilizing these procedures should provide copies of the agreed-upon

procedures to requesting public agencies. The carrier should also

provide a copy of the reports to the FAA, if requested.

The use of this guide by auditors on behalf of the air carriers

will provide the FAA and airports collecting PFC's with

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an acceptable level of assurance that the air carrier has followed

regulatory procedures. Although the guide is not intended to define the

sole method of complying with the audit requirements of section 158.69

of Part 158, the FAA has determined that the use of the procedures in

this audit guide by the auditors for an air carrier will provide

sufficient assurance that the air carrier has met the requirements of

Part 158 such that the FAA would not normally require additional

reports, undertake an audit of the carrier, or request Department of

Transportation, Office of the Inspector General (DOT OIG), intervention

on the FAA's behalf. The FAA would not normally initiate further

monitoring efforts unless an airport or other source subsequently

substantiates a significant violation of the regulation.

The FAA will not have the same level of confidence with an air

carrier whose auditors have not used the procedures outlined in this

guide. Accordingly, alleged collection and remittance discrepancies

raised by airports through their monitoring of local PFC revenue

against air carriers whose auditors have not used this guidance are

more likely to trigger additional FAA monitoring activities, including

requiring additional reports, the undertaking of an audit, or a request

for DOT OIG intervention. This guidance shall not, however, foreclose

other FAA options for enforcing correct collection and remittance

procedures and responding to allegations of improper collection and

remittance practices. The FAA expects air carriers to attain a

reasonable level of accuracy with regard to PFC remittances.

Issued in Washington, DC on August 10, 1999.

Catherine M. Lang,

Acting Director, Office of Airport Planning and Programming.

[FR Doc. 99-21276 Filed 8-16-99; 8:45 am]

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