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CM > Module 1, Objective 5, Airport Financial Management > Flashcards

Module 1, Objective 5, Airport Financial Management Flashcards

1
Q

What charge is the most restrictive in rate-setting and use?

A

Aeronautical charges

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2
Q

What is the office of Airport Compliance and Management Analysis (ACO)

A

it is an FAA line of business that oversees airport fiscal practices and monitors relevant federally mandated obligations that are conditions for receiving federal grants

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3
Q

What are the two divisions of the ACO?

A
  1. Financial Management Analysis
  2. Airport Compliance Program
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4
Q

What are the five major functional areas of accounting?

A
  1. Accounts Payable
  2. Accounts Receivable
  3. Payroll
  4. General Ledger
  5. Grant Accounting
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5
Q

In formulating an operating budget, what four critical tasks must be addressed?

A
  1. plan for the operational needs of the organization
  2. obtain resources for the airport operating environment
  3. distribute those resources throughout the organization
  4. track the resource expenditures to ensure they are used effectively and efficiently
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6
Q

What does a Capital Budget adress?

A

items that are viewed as investments in assets that have useful lives extending beyond a single fiscal year and exceeding a certain value aka a time frame as long as 5-10 years

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7
Q

How does the FAA view an airport’s capital budget?

A

as a planning tool

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8
Q

How often does the FAA require a capital budget?

A

the FAA requires airport sponsors to submit a five-year capital improvement plan and update it annually

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9
Q

What do capital expenses include

A

debt service on financial assets, depreciation/amortization on assets funded with airport reserves, a coverage requirement on any revenue bond

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10
Q

What are the most common budgeting techniques

A

incremental budgeting, zero-based budgeting (ZBB), management by objectives (MBO), Activity-based budgeting (ABB)

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11
Q

incremental budgeting

A

one of the most common forms, it takes the previous year’s numbers and adjusts them by a predetermined percentage

advantage: is its simplicity and lack of resources needed to complete it

disadvantages: the potential to increase items that don’t need it, and neglect items that need more

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12
Q

zero-based budgeting (ZBB)

A

a process that assumes the budget for each year has no historical information, all items must be justified on their own

Advantages: requires a fresh perspective and reanalysis every year

disadvantages: practically impossible to fully implement this policy

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13
Q

management by objectives (MBO)

A

a results-orientated budgeting technique; managers understand what the airport objectives and targets and and develop a budget to obtain those results

advantages: increased communication between management and employees

disadvantages: puts increased strain on employees to meet the goals in a specified time frame

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14
Q

Activity-based budgeting (ABB)

A

it focuses on the activities of the airport to determine budget amounts rather than the functions of the airport

advantage: it concentrates on volume of activities and overhead costs

disadvantages: only effective for airports that are using activity based costing (ABC)

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15
Q

What are the basic financial statements that airports provide after the end of each fiscal year?

A

statement of net position/assets (balance sheet), statement of revenues, expenses and changes in net position/assets (income statement), statement of cash flows

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16
Q

What is the statement of net assets aka balance sheet?

A

shows the balance of the airport’s assets against the liabilities

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17
Q

What is the income statement?

A

it shows the revenues, expenses, and changes in net assets

18
Q

what is the statement of chase flows

A

describes how the airport received its cash over the fiscal year and how it spent it

19
Q

What is the comprehensive Annual Financial Report (CARF)

A

it contains the financial information and the financial statements, but also other explanatory and statistical information

20
Q

Grant Assurance 26, Reports and Inspections

A

requires sponsors to annually report their budget

21
Q

Form 5100-126, Financial Government Payment Report

A

shows the revenue paid to other units of the government for services

22
Q

Form 5100-127, operating financial summary

A

requires the airport operator to break down revenues by Aeronautical, non-aeronautical, and non-operating

23
Q

Aeronautical Revenue

A

generated from aeronautical activity related directly and substantially to the movement of passengers, baggage, mail and cargo

includes: landing fees, land leases, terminal and hangar rents, tie-down rents, fuel tax and fuel sales

24
Q

Non-Aeronautical Revenue

A

includes catering facilities, rental car operations, parking, concession sales, land rent received from off-airport industrial park that is owned by the airport, and reservation centers

25
Q

Non-operating revenue

A

TSA grants, AIP grants, airport equity, PFCs, customer facilities charges, interest income and grants, airport revenue bonds and other debt instruments

26
Q

aeronautical activity

A

any activity that involves, makes possible, or is required for the operation of aircraft that contributes to or is required for the safely of such operations:
general and corporate aviation, air taxi and charter operations, scheduled and non-scheduled air carrier operations, pilot training, aircraft rental and sightseeing, areal photography, crop dusting ect….

27
Q

At a commercial service airport where does the most aeronautical revenue come from?

A

landing fees, fuel flowage fees, ground leasing and building leasing

28
Q

At a GA airport where does the most aeronautical revenue come from?

A

fuel flowage fees and ground leasing for hangars and FBOs or other SASOs, such as charter operations, maintenance, flight training, and fuel flowage fees

29
Q

what is the universal type of aeronautical user charge at a commercial service airport?

A

Landing Fee

30
Q

What is Payment in Lieu of taxes? (PILOTS)

A

they are intended to compensate the airport owner for the removal of the airport land from the tax roll

31
Q

What is revenue diversion?

A

the unallowable use of airport revenue for non-airport purposes

32
Q

What are the benefits to having an airport nearby?

A

air travel’s transportation benefits for passengers and cargo and things such as air medical

municipality reaps the benefits derived from the new money from air transpiration and it creates jobs for the community

33
Q

Grant Assurance 25, Airport Revenue

A

requires the use of airport revenue generated by the airport and local taxes on fuel to be used only for the capital or operating costs of

34
Q

What is an Airport Revenue Use Policy?

A

it defines certain key concepts relating to the allowable use of airport revenue

35
Q

What is Grant Assurance 24, Fee and Rental Structure?

A

it requires the airport sponsor to set fees and lease rates and other charges directed at making the airport as self-sustainable as possible

it ensures that the airports supported by federal grants do not discriminate by user and, therefore, are truly public use

there should be no deals where the airport sponsor is charging fees or lease rates far bellow the market

prohibits establishing fees based on federal money spent for airport improvement or noise mitigation

36
Q

What does the Airport and Airway Improvement Act of 1982 (AAIA) require?

A

airports to be as self-sustainable as possible

37
Q

What does self-sustainable mean?

A

the airport relies only on its revenue streams for operational expenses. The airport can accept federal or state grant monies for capital projects

38
Q

What is a rate base?

A

it refers to all costs associated with providing airfield facilities and services to aeronautical users

39
Q

What is a residual agreement for rate setting?

A

Where an air carrier pays the difference if the airport cannot meet its cash flow requirements for the year

40
Q

What is a compensatory agreement for rate setting?

A

the airport operator establishes “cost centers” and charges the user for the use of those services

41
Q

In setting the rate base, what the possible methodologys?

A

historical cost valuation (HCA), direct negotiation, or objecting determinations of fair market value

CM (23 decks)

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