Summary

Under the Airport Improvement Program, the Federal Aviation Administration (FAA) funds airport improvement projects. FAA can provide either grants or letters of intent, which document FAA's intent to obligate the money in future years, subject to authorization and appropriations. Between fiscal years 1988 and 1993, FAA issued letters of intent worth more than $2 billion, including nearly $1.5 billion that FAA plans to obligate in fiscal years 1994-2005. FAA is required to limit letters of intent to projects that significantly enhance systemwide airport capacity. FAA must also plan disbursements under letters of intent so that enough funds are available for other necessary airport improvements. This report (1) provides a profile of the letters of intent that FAA has issued and (2) discusses whether FAA has effectively managed the use of letters of intent.

GAO found that: (1) FAA has significantly increased its use of LOI to fund AIP projects since fiscal year 1988 and plans to double the amount of LOI in fiscal years 1994 through 1999; (2) LOI constitute an increasing percentage of total AIP obligations; (3) LOI use has increased because airport sponsors can avoid competing with other projects for funds in future years and LOI are more flexible than AIP single-year or multiyear grants; (4) FAA could more effectively manage its LOI by ensuring that they are used to significantly improve airport capacity, establishing criteria defining a significant improvement, and establishing program performance goals and measurements; (5) FAA has not analyzed how projects funded under LOI affect the national airport system; (6) FAA has used LOI without congressional approval to fund projects at small airports and auxiliary airport facilities because it could not issue multiyear grants; (7) FAA has incorrectly assumed that AIP discretionary funds would not decrease and has not reserved sufficient discretionary funds to meet the immediate needs of the national airport system; and (8) FAA failure to pay LOI on time and in full can jeopardize new LOI-backed bond financing.