Module 2 - Operating, Budgeting, Accounting and Reporting

Question 1

What is Accounting?

Answer 1

a. Definition from 1941 – the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least of financial character, and interpreting the results thereof.
b. Definition from 1970 – a service activity whose function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.

Question 2

What is AICPA?

Answer 2

American Institute of Certified Public Accountants

Question 3

What are the three types of accounting?

Answer 3

a. Cash Basis – revenues and expenses are recorded when cash is received or paid.
b. Accrual Basis – transactions are recorded in the period that they occur regardless of when cash is paid or received. This methodology gives a greater insight on the financial impact of transactions that have not yet impacted cash.
c. Modified Accrual – expenses are recorded when incurred, with few exceptions, and revenues are recorded once they are measurable and available. Capital acquisitions are expensed when purchased, therefor depreciation is not recorded in the accounting system. This method of accounting was developed for, and primarily used by, government entities to reflect the funding and operating differences between government and private organizations.

Question 4

What are the major areas of The Accounting Function?

Answer 4

a. Accounts Payable – recording and processing of transactions that involve the payment of funds.
b. Accounts Receivable – record, process, and ensure the receipt of money coming into the organization.
c. Payroll – payment of wages, salaries, overtime, etc. of employees. Also includes the management and administration of employment taxes and employee payroll deductions.
d. General Ledger – this is the foundation of the double-entry methodology of accounting. This contains all the accounts that the organization needs.
e. Financial Reporting – overall responsibility to compile and provide quantitative and qualitative analyses of financial reports.
i. Fixed assets – defined as non-monetary assets that are expected to have a useful life of more than one year, are acquired for use in the operation of the airport and are not intended for resale.
ii. Budget – compilation, review, and analysis of the airport’s operating and capital budget.

Question 5

What are PFCs?

Answer 5

Passenger Facility Charges.

Question 6

What are Intra-Government Services?

Answer 6

Government entities (city, county, etc.) often rely upon services provided by other departments or units of the entity.

Question 7

Are airports required to report Intragovernmental services to the FAA?

Answer 7

Yes

Question 8

What is a Chart of Accounts?

Answer 8

A list of accounts used in recording transactions.

Question 9

What is the FASB?

Answer 9

Financial Accounting Standards Board.

Question 10

What is the FAF?

Answer 10

Financial Accounting Foundation

Question 11

What is the GASB?

Answer 11

Governmental Accounting Standards Board

Question 12

What is GAAP?

Answer 12

Generally Accepted Accounting Principles

Question 13

What makes up GAAP?

Answer 13

GASB & FASB

Question 14

What are the major considerations of GAAP?

Answer 14

a. Recognition – what items should be recognized in the financial statements
b. Measurements – what amounts should be reported for each of the elements included in financial statements
c. Presentation – what line items, subtotals, and totals should be displayed in the financial statements, and how might items be aggregated within the financial statements
d. Disclosure – what specific information is most important to the users of the financial statements

Question 15

What is ERP?

Answer 15

Enterprise Resource Planning Systems.

Question 16

16. What is ERP Defined as?

Answer 16

Techniques and concepts for integrated management of businesses as a whole from the viewpoint of the effective use of management resources to improve the efficiency of enterprise management.

Question 17

17. What is the intent of ERP systems?

Answer 17

Replace stand-alone systems that perform specific functions such as accounts payable, accounts receivable, purchasing, fixed assets, maintenance planning/work order management, and property management and integrate them into one single computer system that performs all or most of those functions.

Question 18

What are the advantages of ERP?

Answer 18

a. Eliminates redundant entries in multiple systems
b. Flexibility of reporting

Question 19

What are the disadvantages of ERP?

Answer 19

a. Many companies provide systems
b. Cost of system
c. Software licensing costs

Question 20

What is budgeting

Answer 20

Forecasting of revenues and expenses for a specific period of time.

Question 21

What are two types of budgeting?

Answer 21

a. Operating budgets – focus on revenues and expenses resulting from day-to-day operations.
b. Capital budgets – address items that are viewed as investments in assets that have useful lives extending beyond a single fiscal year and exceeding a certain value.

Question 22

What is the budget cycle?

Answer 22

a. Planning
b. Preparation
c. Approval
d. Execution (of Expenditure)
e. Analysis
f. Audit

Question 23

What is planning?

Answer 23

Ensuring that the budget process will be reflective of the long-term strategy of the airport/organization.

Question 24

What is preparation?

Answer 24

Compiling of the budget documents and support. Documents from staff departments submit requests.

Question 25

What is approval?

Answer 25

Recommendation from internal and external parties.

Question 26

What is execution?

Answer 26

After approval and the new fiscal year has begun, the budget is in the execution phase.

Question 27

What is Analysis?

Answer 27

How is the airport performing against the budget? Reports are useful in uncovering challenges in cost or revenue areas.

Question 28

What is an Audit?

Answer 28

This is the last phase and is conducted by auditors, usually external to ensure budgetary compliance.

Question 29

How can budgets be built?

Answer 29

a. Top-down – executive management sets forth the budget goal and managers have little input.
b. Bottom-up – managers and staff submit budget requests and submit those to management.
c. Negotiated/collaborative budget – Executive management sets goals and staff are responsible for preparing a budget.

Question 30

What are some budget techniques?

Answer 30

a. Incremental Budgeting – most common, takes the previous year/period’s actual numbers and adjusts by a predetermined percentage.
b. Zero-Based Budgeting (ZBB) – all items must be justified on their own.
c. Management by Objectives (MBO) – results-oriented budgeting. Managers understand what the objectives and targets are and develop the budget to obtain those results.
d. Activity-based Budgeting (ABB) – focuses on the activities of the airport to determine budget amounts.

Question 31

What is the GFOA?

Answer 31

Government Finance Officers Association – they represent public finance officials throughout the U.S. and Canada.

Question 32

What is Management Financial Reporting?

Answer 32

Accurately recording transactions and activities of the organization, and then reporting the information to the stakeholders and those outside the organization.

Question 33

What is Ad Hoc Reporting?

Answer 33

Answering questioning presented by staff or departments needed to complete tasks/projects.

Question 34

What is Monthly Reporting?

Answer 34

Reports are compiled on a monthly basis to evaluate financial performance.

Question 35

What is Annual Reporting?

Answer 35

Reports are compiled on an annual basis to evaluate financial performance. This will include three financial statements:
a. Statement of Net Position/Assets (balance sheet)
b. Statement of Revenues, Expenses, and Changes in Net Position/Assets (income statement)
c. Statement of Cash Flows

Question 36

What are the different types of Annual Financial Audits?

Answer 36

a. Unqualified – financial statements are presented fairly in accordance with GAAP
b. Qualified – auditor cannot state that all financial statements are materially in compliance with GAAP.
i. Misstatements in statements that are not materially pervasive
ii. Portions of the financial statements are not presented IAW GAAP
iii. When the auditor is unable to audit one or more areas of the financial statements, but the rest are compliant with GAAP
c. Disclaimer of opinion – given by an auditor indicating that the auditor is unable to provide an opinion in regard to the fair presentation of the financial statements. Most frequently results from limited evidence available to the auditor.
d. Adverse opinion – auditor states that financial statements are materially misstated. The financial statements do not comply with GAAP and are inaccurate and unreliable.

Question 37

What is the audit process?

Answer 37

a. Planning/preparation
b. Entrance conference
c. Fieldwork
d. Draft Report
e. Exit Conference
f. Draft Report
g. Final Report

Question 38

What is a Single Audit?

Answer 38

Formerly known as an A-133 audit, created from the Single Audit Act Amendments of 1996 (Single Audit Act). Required from all non-federal government agencies and non-profit organizations that expend $750,000 or more in federal grants during a fiscal year.

Question 39

What is a PFC Audit?

Answer 39

1. This is an audit of the Passenger Facility Charges pursuant to 14 CFR 158.67. Can be part of a single audit or as a stand-alone audit.

Question 40

Can airlines request PFC Audit?

Answer 40

Yes

Question 41

What is the guide for a PFC Audit?

Answer 41

FAA APP-530.

Question 42

What are the parts of a corrective plan for a PFC Audit?

Answer 42

a. Names of contact persons for corrective action
b. Corrective action planned
c. Anticipated completion date
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Question 43

Who is part of the Audit Distribution?

Answer 43

a. In cases involving Financial Report, Audit Report, Single Audit, and PFC Audit, the reports will need to be sent to governmental agencies/entities.
b. In other cases, the best practice is to share with various stakeholders.

Question 44

What is the CAFR?

Answer 44

Comprehensive Annual Financial Report

Question 45

What does the CAFR Contain?

Answer 45

a. Introductory Section, including a letter of transmittal
i. Information on the form and profile of the governmental entity preparing the CAFR
ii. List of government’s principal officials that were in place for the entity during the period of time that the CAFR covers
iii. An organizational chart of the entity
iv. Transmittal letter prepared by the staff and addressed to the leaders of the governing body over the airport.
b. Financial section; to include:
i. Independent auditor’s report
ii. Management’s discussion and analysis (MD&A)
iii. Basic financial statements
iv. Required supplementary information other than the MD&A
v. Combined and individual fund statements and schedules
c. Statistical Section.
i. Financial trends
1. Information about net assets, changes in net assets, fund balances, and changes in fund balances
ii. Revenue capacity
1. Information about the revenue base by major component, revenue rates, and principal revenue payers
iii. Debt capacity
1. Ratios of outstanding debt, direct and overlapping debt, debt limitations, and pledge-revenue coverage.
iv. Demographic and Economic Information
1. Information about principal employers, and demographic and economic indicators
v. Operating Information
1. Number of employees, level of demand for services, and capital assets.

Question 46

What are some other reports?

Answer 46

a. PFC Reports
i. Actual PFC revenue
ii. Cumulative actual PFC revenue
iii. PFC level for each project
iv. Each project’s current schedule
b. FAA AIP Grant Reports – Quarterly Report and SF-425 Report
i. SF-4525 components
1. Federal grant cash receipts, disbursements, and federal cash on hand
2. Federal expenditures and the unobligated balance of federal funds
3. The recipient’s (sponsor’s) share required
4. Indirect expense information
c. FAA Forms 126 and 127
i. Form 126
1. Financial governmental payment report for airports to report to the FAA any payments it makes to governmental entities, the services the airport performs, and the land and facilities that the airport provides to any other governmental entities
ii. Form 127
1. This form is used to report to the FAA the airport operating revenues, expenses, and other information.

Question 47

What is considered FAA operating revenues?

Answer 47

a. Passenger airline aeronautical revenues
b. Landing fees
c. Terminal rents, fees, and utilities
d. Cargo and hangar rentals
e. Parking ad ground transportation revenues
f. FBO revenue

Question 48

What are FAA Operating Expenses?

Answer 48

a. Airfield
b. Terminal
c. Parking
d. Roadways, rail, and transit
e. Other

Question 49

What statistics are required to be reported?

Answer 49

a. Enplanements
b. Landed weight in pounds
c. Signatory landing fee rate per 1,000 lbs
d. Annual aircraft operations
e. Passenger aiurline cost per enplanement
f. Full-time equivalent employees at the end of the year
g. Security and law enforcement costs
h. ARFF costs
i. Repairs and maintenance
j. Marketing/advertising/incentives