The following cost elements are those which were reported by the USMS in its FY 1993 Federal Aviation Management Information System cost reports. The USMS' general method to obtain the reported costs is explained herein. Where we have taken exception to a reported amount, we have provided an explanation, as well as a method which could have been used to obtain a more accurate cost figure.

Our testing to verify the accuracy of reported costs was based on a sample of one aircraft from each of the four types reflecting multiple aircraft. We selected the aircraft with the greatest number of FY 1993 flight hours21 and reconstructed their costs based on available USMS data. The comparisons, by each cost element and in total, are presented in Appendix VI.

Two types of costs are reported on the Federal Aviation Management Information System cost reports-actual costs incurred by the agency and computed costs. The computed costs are to be used when OMB-required cost comparisons are made. The use of computed costs allows the cost comparison of agency aircraft with commercially available aircraft to be on a comparable basis; i.e., costs which are not applicable to government-owned aircraft, such as insurance, depreciation, and interest expense, are added to the agency aircraft cost in order to simulate a commercial situation. Without these additional costs, the government aircraft would usually appear to be the lower-cost option. The disadvantage of this situation for air program managers is that the Federal Aviation Management Information System format commingles the actual and computed costs, thus making it difficult to determine the actual cost of operating a government aircraft fleet.

We have modified the format of the cost comparisons in Appendix VI to present the data in a manner more useful to aviation managers. The modified format contains three parts:

Operating Costs. The costs necessary for the operation of the aircraft; i.e.; fuel, crew, and maintenance. All maintenance is to be included. The USMS' method of capitalizing significant maintenance events and amortizing the cost over the useful life is considered an operating cost.

Program Costs. The cost to support flight operations; e.g., overhead.

Computed Costs. Costs for which no expenditures were made but are computed in order to perform the comparisons required by OMB Circular A-76.

The modified format allows managers to readily determine the cost to operate and support aircraft, as well as the costs to perform required cost comparisons.

In addition to the above, we have compressed the prescribed cost elements to simplify report presentation; i.e., we have combined the two crew cost categories reported by the USMS into a single category entitled "crew costs."


Fuel and Lubricants. The Air Operations Division received the fuel invoices and scheduled them for payment. The total of the fuel costs paid, and the fuel invoices on hand and not yet paid, were the sources for the fuel costs reported by aircraft on the FY 1993 Federal Aviation Management Information System cost reports. We did not take any exception to the fuel and lubricants amount reported by the USMS. Therefore, the cost comparisons in Appendix VI contain no differences between the reported costs and the reconstructed amounts.

Crew Costs. The USMS computed crew costs as follows:

Salaries. The actual annual salaries for Air Operations Division pilots, Deputy U.S. Marshals, and Air Escort Officers were totaled. No crew costs were included for the three Anchorage-based aircraft.

Overtime and Travel Costs. FY 1993 costs for overtime and travel of the pilots, Deputy U.S. Marshals, and Air Escort Officers were totaled.

Fringe Benefits. Fringe benefits were calculated by adding 38 percent to the applicable salaries. The Air Operations Division Administrative Officer stated the fringe benefit application rate was obtained from USMS Headquarters accounting personnel.

The above costs were totaled and charged to individual aircraft on a pro rata distribution of the hours flown by each aircraft during the fiscal year.

We took exception to several aspects of the methodology used to compile the reported crew costs. Specifically:

Crew Composition. Deputy U.S. Marshals and Air Escort Officers should not have been included in the crew costs to operate the aircraft. Escort personnel are required regardless of the transportation mode and are not peculiar to aircraft operations.

Aircraft Without Crew Costs. Pilot costs for the three aircraft in Anchorage should have been included in the reported costs.

Fringe Benefit Rate. The rate specified for fringe benefit calculations by OMB Circular A-76, Transmittal Memorandum No. 7, is 29.55 percent for General Schedule employees and 33.35 percent for sworn officers.

Crew Cost Application to Aircraft. The application of crew costs equally to all aircraft based on flight hours does not accurately reflect the cost of operating the aircraft. For example, the Boeing 727s required three crew members, while other aircraft needed one or two. The method used by the Air Operations Division understated the cost to operate the large aircraft, and overstated the cost to operate those aircraft requiring fewer crew members.

Our reconstructed crew costs in the cost comparisons for the sampled aircraft (Appendix VI) were computed in the following manner:

All salary, fringe benefit, overtime, and travel costs for Deputy U.S. Marshals and Air Escort Officers were subtracted from the reported costs.

Crew costs were estimated for the three Anchorage-based aircraft and applied to the aircraft based on flight hours.

Fringe benefits were calculated on salaries at the rates specified by OMB Circular A-76, Transmittal Memorandum No. 7.

The crew cost application computation was modified to include the number of crew members required to operate each aircraft. The result was a weighted hourly cost which was applied to Oklahoma City-based aircraft on the basis of the number of hours flown during the fiscal year.

Based on our reconstructed crew costs, the USMS' reported crew costs were overstated by a net total of approximately $700,000.

Maintenance. The USMS' reported costs were understated at least $252,000. All aircraft maintenance was performed by contract. The Air Operations Division established an in-house system to monitor maintenance expenditures because it considered the Financial Management Information System obligation/expenditure reports unreliable. Because the Division's system tracked only expenditures and not obligations, the difference between the reported costs and our reconstructed costs was due to additional invoices, totaling approximately $252,000, being paid by the Division between their reporting date and the date of our field work.

The maintenance costs not reported were identifiable by aircraft. Therefore, our reconstructed costs for the sampled aircraft (Appendix VI) include additional maintenance costs only as they pertain to the specific aircraft.


Overhead. Overhead has two parts for the purposes of OMB Circular A-126; i.e., operations and administrative. Operations overhead is described in Attachment B of the Circular as ". . . include[ing] all costs, not accounted for elsewhere, associated with direct management and support of the aircraft program." Administrative overhead is the cost to support the aviation program incurred by entities external to the program. An example would be the cost of USMS headquarters personnel, such as accounting or procurement staff, which support the air program. The USMS generally applied overhead costs (administrative and operational) to individual aircraft based on the flight hours each flew as a percentage of total hours flown during the fiscal year.

The overhead costs reported on the FY 1993 Federal Aviation Management Information System reports were as follows:

Administrative Overhead. The cost reports reflected administrative overhead expenses totaling $115,775. All of the reported amount was actually operations expenses, for costs such as Air Operations Division salaries and supplies. The $115,775 would have been more appropriately charged as operations overhead.

Operations Overhead. The cost reports reflected operations overhead totaling $1,024,876. That amount was understated and did not contain all appropriate air operations costs which had not been reported in other cost elements.

We recomputed the operations overhead cost based on Air Operations Division records and arrived at a total of $6,085,000. However, the addition of the above-mentioned misreported administrative overhead costs to the reported operational overhead costs still left an understated amount of approximately $4,944,000.

Our reconstructed overhead costs in the cost comparisons for the sampled aircraft (Appendix VI) were computed in the following manner:

Administrative Overhead. We did not include any administrative overhead in our reconstructed costs. Discussions with Air Operations Division administrative staff determined that the support from external entities was not significant.

Operations Overhead. We applied the total operations overhead cost to individual aircraft based on the percentage of maintenance costs of each aircraft to the total maintenance cost for the fiscal year. Air Operations Division administrative personnel were of the opinion that the application of operations overhead based on maintenance costs, rather than flight hours, more accurately represented the management and support efforts of the Division.

Landing and Tie-down Fees. The cost reports included $32,373 for landing and tie-down fees. We did not take any exception to the total amounts reported or the amounts for the sampled aircraft. Therefore, the cost comparisons in Appendix VI contain no differences between the reported costs and our reconstructed amounts.

Capital Improvements Depreciation. The USMS expended $5,678,740 for significant improvements to aircraft during FY 1993. The improvements were capitalized and an asset life and residual values were assigned to each aircraft. The USMS' reported capital improvement depreciation expense totaled $6,422.

We reconstructed the capital improvements depreciation expense for the sampled aircraft (Appendix VI). We did not change the asset life of the improvements, but we eliminated the residual values. In our judgment, the improvements were basically maintenance activities, even though some increase in aircraft values may result at the end of the useful life of the improvements. Elimination of the residual values resulted in an increased depreciation expense of $13,234 for all USMS aircraft having capitalized improvements.

Aircraft Lease. The USMS reported an aircraft lease expense of $874,247 for one aircraft. That amount was actually an equity payment under a lease-purchase agreement. We eliminated the payment from our reconstruction as the depreciable value of the aircraft would be amortized through future depreciation charges. As a result, the costs were overstated by the reported amount.


Self Insurance. The USMS computed self insurance in accordance with instructions prepared by the Interagency Committee for Aviation Policy. Therefore, we did not take any exception to the USMS' computed costs.

Airframe Depreciation. The USMS' reported costs reflected an airframe depreciation expense of $348,750. We took exception to the reported amounts for many of the aircraft because of the inconsistencies in the assumptions used to calculate the amounts. For example:

aircraft had been assigned inconsistent asset lives, ranging from 0 to 20 years.

one aircraft had a capitalized value of $0.

residual values ranged from $0 to the capitalized value of the aircraft.

The result was an understatement of approximately $84,000 for airframe depreciation expense.

We reconstructed airframe depreciation expense for the sampled aircraft (Appendix VI) using a 20-year asset life with a 20 percent residual value for all aircraft.

Cost of Capital. The USMS did not include a cost of capital element in its cost reports. That cost element is not required by 41 Code of Federal Regulations 101-37, but is required by OMB Circular A-126. Correct computation of the cost of capital required knowledge of the Treasury bond rates in the year the aircraft was acquired, as well as a note amortization schedule for the estimated useful life of the aircraft. The Air Operations Division had not been provided that information by the Justice Management Division or GSA.

We reconstructed the cost of capital expense for the sampled aircraft (Appendix VI) using Treasury bond yields obtained from OMB and note amortization schedules. The understated amount was calculated to be approximately $686,000.

Spares Inventory Expense. The USMS' cost reports did not include the spares inventory cost element. This cost element is not required by OMB Circular A-126, but is required by 41 Code of Federal Regulations 101-37. The USMS used the cost elements contained in the automated Federal Aviation Management Information System software provided by the Interagency Committee for Aviation Policy. Since those elements did not include spares inventory expense, we took no exception to the USMS not including the element. We also did not include the cost element in our reconstructed costs for the sampled aircraft (Appendix VI).


21 The Boeing 727 with the greatest number of hours flown was in the last year of a lease-purchase agreement and, therefore, was not comparable with the other aircraft tested. Thus, we selected the Boeing 727 with the second greatest number of flight hours instead.