Module 1, Objective 5, Airport Financial Management Flashcards
What charge is the most restrictive in rate-setting and use?
Aeronautical charges
What is the office of Airport Compliance and Management Analysis (ACO)
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
What are the two divisions of the ACO?
- Financial Management Analysis
- Airport Compliance Program
What are the five major functional areas of accounting?
- Accounts Payable
- Accounts Receivable
- Payroll
- General Ledger
- Grant Accounting
In formulating an operating budget, what four critical tasks must be addressed?
- plan for the operational needs of the organization
- obtain resources for the airport operating environment
- distribute those resources throughout the organization
- track the resource expenditures to ensure they are used effectively and efficiently
What does a Capital Budget adress?
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
How does the FAA view an airport’s capital budget?
as a planning tool
How often does the FAA require a capital budget?
the FAA requires airport sponsors to submit a five-year capital improvement plan and update it annually
What do capital expenses include
debt service on financial assets, depreciation/amortization on assets funded with airport reserves, a coverage requirement on any revenue bond
What are the most common budgeting techniques
incremental budgeting, zero-based budgeting (ZBB), management by objectives (MBO), Activity-based budgeting (ABB)
incremental budgeting
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
zero-based budgeting (ZBB)
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
management by objectives (MBO)
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
Activity-based budgeting (ABB)
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)
What are the basic financial statements that airports provide after the end of each fiscal year?
statement of net position/assets (balance sheet), statement of revenues, expenses and changes in net position/assets (income statement), statement of cash flows
What is the statement of net assets aka balance sheet?
shows the balance of the airport’s assets against the liabilities
What is the income statement?
it shows the revenues, expenses, and changes in net assets
what is the statement of chase flows
describes how the airport received its cash over the fiscal year and how it spent it
What is the comprehensive Annual Financial Report (CARF)
it contains the financial information and the financial statements, but also other explanatory and statistical information
Grant Assurance 26, Reports and Inspections
requires sponsors to annually report their budget
Form 5100-126, Financial Government Payment Report
shows the revenue paid to other units of the government for services
Form 5100-127, operating financial summary
requires the airport operator to break down revenues by Aeronautical, non-aeronautical, and non-operating
Aeronautical Revenue
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
Non-Aeronautical Revenue
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
