720-913-5000 auditor@denvergov.org

Audit Report

Airport Improvement Program Grants – Denver International Airport

To determine whether Denver International Airport has adequate controls to properly manage and record grants.

Watch the Audit Committee presentation here soon.

The Federal Aviation Administration’s Airport Improvement Program assists U.S. airports with grant funding to strengthen the nation’s aviation infrastructure. Grant amounts are based on an airport’s passenger volume, as well as national priorities.

Denver International Airport served about 64.5 million passengers in 2018. As a recipient of Airport Improvement Program funding, the airport uses these dollars to maintain its infrastructure—including runways, taxiways, signage, and lighting to ensure the airport is safe, secure, and efficient.

As allowable project costs are incurred, the airport requests reimbursement from the FAA and receives the awarded funds following FAA approval.

We assessed the Denver International Airport Finance Division’s compliance with City and federal requirements for Airport Improvement Program grants, as well as their policies and procedures for grant administration. We found the Finance Division has not ensured compliance with both City and federal regulations, because the airport has insufficient internal controls over its grant administration, including inadequate policies and procedures.

Denver International Airport Has Not Ensured Compliance with City and Federal Grant Rules and Has Insufficient Policies and Procedures to Oversee Grants

  • The airport incurred and submitted for reimbursement to the Federal Aviation Administration $2.81 million in unallowable project costs. The airport’s Finance Division does not have effective controls to ensure it is complying with federal grant requirements, including that project costs are incurred in the appropriate period. The grant reimbursement request procedures of the airport’s Finance Division are not linked to a grant policy.
  • On average, reimbursement requests were submitted 50 days late—conflicting with a City Fiscal Accountability Rule and potentially costing the airport money in lost interest. The airport’s processes do not ensure employees submit grant reimbursement requests on time.
  • A schedule to review and update the Finance Division’s grant policies and procedures—as well as a process to make changes to those documents in a timely manner—does not exist. The division’s policies and procedures are incomplete, outdated, and do not accurately reflect business practices.

1.1 Develop and Implement a Grant Policy – The Senior Vice President of Financial Management should develop and implement a grant policy that establishes controls to validate that all grant expenditures were incurred within the grant agreement period and ensures compliance with laws and regulations.

Agency Response: Agree, Implementation Date – December 31, 2019

1.2 Obtain Prior Written Authorization – The Deputy Chief Financial Officer should ensure prior written authorization from the Federal Aviation Administration is obtained by the airport for projects that start work prior to final execution of the grant agreement.

Agency Response: Disagree (response and Auditor’s Addendum on pg 21)

1.3 Ensure Timely Requests for Grant Reimbursement – The Senior Vice President of Financial Management should develop a grant policy requiring reimbursement requests (i.e., drawdowns) to be completed by the airport’s Finance Division in a timely manner and in accordance with City Fiscal Accountability Rule 9.2.

Agency Response: Disagree (response and Auditor’s Addendum on pg 22)

1.4 Review and Update Policies and Procedures – The Senior Vice President of Financial Management should develop a schedule to review and update the grant policies and procedures annually. In addition, implement processes to update policies and procedures as changes occur to ensure processes are documented and accurately reflect current business practices.

Agency Response: Agree, Implementation Date – December 31, 2019

The objective of our audit of Airport Improvement Program grants at Denver International Airport was to determine whether the airport has adequate controls to properly manage and record grants. I am pleased to present the results of this audit.

The audit revealed Denver International Airport has weak internal controls over its grant administration and is not ensuring compliance with City and federal grant requirements. We found the airport sought reimbursement for $2.81 million in grant expenditures that were incurred outside the allowed time frame. This was because personnel in the airport’s Finance Division do not verify that grant expenditures occur in the appropriate period in accordance with grant requirements. Meanwhile, the airport does not submit its reimbursement requests on time to the Federal Aviation Administration, which conflicts with a City fiscal rule. Further, the Finance Division’s policies and procedures for grants are insufficient and do not ensure employees can replicate procedures.

Through implementing recommendations for stronger policies and grant monitoring, the airport will be better equipped to ensure more effective grant compliance and administration. The Finance Division needs to develop and implement a grant policy, incorporate compliance controls in its procedures, and develop a schedule to review and update its policies and procedures.

This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, “General Powers and Duties of Auditor,” and was conducted in accordance with generally accepted government auditing standards. Those standards require we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix A includes the schedule of findings and questioned costs based upon our audit.

We extend our appreciation to the personnel from Denver International Airport’s Finance Division who assisted and cooperated with us during the audit. For any questions, please feel free to contact me at 720-913-5000.

Follow-up report

A follow-up report is forthcoming. 

Audit Team: Kevin Sear, Sonia Montano, Ivy Anderson, Dave Hancock, Chris Keller