City of Charlotte, North Carolina
Charlotte Douglas International Airport
Turn Over Review
Table of Contents
Transmittal Letter .................................................................................................................................... 1
Background ........................................................................................................................................ 2 - 5
Objectives and Approach ................................................................................................................... 6 - 8
Observation Matrix ............................................................................................................................ 9 - 33
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Billing and Revenues, to include Rental Agreements and Contract Management
Internal Controls, and Project Accounting and Capital Asset Accounting, to include
Grant Budgeting & Accounting
Contract Facility Charges
Airport Special Statements Reconciliation with the Comprehensive Annual Financial Report
Expense Reimbursements to the City
Debt Management
Process Maps ................................................................................................................................. 34 - 39
McGladrey LLP
4725 Piedmont Row Drive
Suite 300
Charlotte, North Carolina 28210-4280
O 704.367.6250
www.mcgladrey.com
June 11, 2014
City of Charlotte, North Carolina
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600 East 4 Street
Charlotte, NC 28202
Pursuant to the approved engagement letter dated September 25, 2013 with the City of Charlotte, North
Carolina (the “City”), we hereby present the Turn Over Review of the Charlotte Douglas International
Airport (the “Airport”), an enterprise fund of the City. Fieldwork commenced October 2013 and was
completed January 2014. From the completion of the fieldwork through present, we have been working
and collaborating with the Aviation Department and City Management regarding their remediation plan of
the identified observations. This review targeted the following high-risk core areas identified by
management:
• Billing and Revenues to include Rental Agreements and Contract Management
• Internal Controls, and Project Accounting and Capital Asset Accounting, to include Grant
Budgeting & Accounting
• Contract Facility Charges
• Special Statements Reconciliation with the Comprehensive Annual Financial Report
• Expense Reimbursements to the City
• Debt Management
Our report is organized in the following sections:
Background
This provides an overview of operations and the core high-risk focus areas as
identified by management for this Turn Over Review.
Objectives
and Approach
The Turn Over Review objectives and focus are expanded upon in this section
as well as a review of the various aspects of our approach.
Observation
Matrix
This section gives a description of the observations noted during our review,
recommended actions as well as management’s responses and action plans.
Process Maps
This section provides process maps depicting the best practice flow of the
identified processes.
This engagement was conducted for the limited purpose described in the Objectives section of this report
and was not designed to identify fraud, including fraud involving employees, management, those charged
with governance, or external entities. Given these limitations, during our engagement we did not identify
any such fraud. However, such fraud may exist that has not been identified.
While the Airport has been one of the nation’s fastest growing and most cost effectively operated airports
for 2 decades, we noted matters, including those indicative of the operational stresses that could occur
from high growth and “lean” operations and management over an extended period, which we have
included in the following Observation Matrix. We would like to thank all those involved from the City and
the Aviation department in assisting us with this Turn Over Review.
Respectfully Submitted,
McGladrey
1
Background
Background
Charlotte Douglas International Airport has been owned and operated by the City of Charlotte for 78
years. The Airport provides service to 142 destinations throughout the world and averages 703 daily
departures. The 1.8-million square-foot terminal building contains five concourses and 95 gates. It has
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more than quadrupled in size since opening in 1982. The Airport is 8 nationwide and 25 worldwide in
passengers. US Airways operates its largest hub at the Airport. The Airport is a major employment
center, with nearly 20,000 workers on site. The majority (6,637) are employed by US Airways, with nearly
8,500 additional workers employed by other airlines, tenants and businesses. In addition, there are more
than 300 Aviation department employees.
This Turn Over Review focused on the following 6 high-risk core areas identified by Management:
Billing and Revenues to include Rental Agreements and Contract Management
The primary sources of revenue at the Airport are fees and charges paid by the airlines and revenues
paid by concessionaires providing services to the general public. Signatory airline terminal and airfield
rates and charges are governed by 25 or 30 year lease agreements and concession revenues are
established by leases of varying methodologies and terms. The airlines are assessed the following
categories of fees and charges: rent, airport services, maintenance and operation fees and landing fees.
Airline fees and charges are established at a level to recover the related service and facilities costs.
Concession revenues are generated either through fixed annual charges or on the basis of a percentage
of sales generated by the tenants’ operations.
The Airport distinguishes operating revenues and expenses from non-operating items. Operating
revenues, (such as terminal, airfield, concessions, parking and other) and expenses generally result from
providing services and producing and delivering goods in connection with the Airport’s principal ongoing
operations. Non-operating revenues, such as passenger facility charge, contract facility charge and
investment earnings result from non-exchange transactions or ancillary services.
Airport operating revenues are derived primarily from the terminal area, concessions and parking (~84%
as of June 30, 2013) and airport non-operating revenues are derived primarily from passenger facility
charges (~61% as of June 30, 2013). Total revenues amounted to $234.9M and $224.2M in fiscal years
2013 and 2012, respectively.
The Aviation department recently went through a system conversion to PROPworks®, in order to
effectively manage their revenue contacts. PROPworks® is a comprehensive software program designed
to manage the lease, property, and revenue information needed to operate complicated businesses and
transportation facilities of all sizes, like the Airport. PROPworks® will allow the Aviation department to
track agreements and leases, to compile information about business relationships, to bill and invoice
tenants or concession operators (collectively “lessee(s)”), and to track service providers and
concessionaires for compliance with agreements.
Currently, the Airport is under agreement with ~200 plus active revenue generating contracts/leases. The
Aviation department has one (1) employee, the Revenue Contracts Manager who is responsible for
administration of the revenue contracts.
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Background - continued
Internal Controls and Project Accounting and Capital Asset Accounting to include Grant Budgeting &
Accounting
The Aviation department maintains a 5-year capital improvement plan covering all areas of airport
infrastructure that is updated on an ongoing basis to reflect the changing physical needs of the Airport.
The plan is reviewed by the engineering and planning teams, approved by Airport management, and
included in the City’s overall capital plan. The Aviation Development department drives the initial capital
project process, with the Aviation Finance team involved in some planning aspects, including review of
assumptions and identification of funding sources. The City’s Central Finance team also consults on the
completed project funding plan and pro forma funding analysis.
The Aviation Development department includes three project managers, five inspectors, and trade
workers. There are two external consultants under contract who work as project managers. The general
arrangement is that horizontal projects are handled by the internal project managers, while vertical
projects are handled by the external project managers. The project managers’ responsibilities include:
review of monthly pay applications, inspection of work in progress, resolution of contractor billing issues,
in-field monitoring of progress and quality, assistance with negotiations, recommendations in areas of
expertise, and monitoring compliance with the critical path and other schedules.
The types of contracts entered by the Aviation department include professional services and construction
contracts. The contract terms vary and may include fixed rates, lump sum amount, cost plus fixed
amount, and unit pricing. All pay applications are approved by the Aviation department’s Assistant
Director for Development. Change orders are approved based on an established authority matrix which
requires City Council approval of all change orders of $100,000 or more, and City Manager approval for
change orders over $50,000.
The Aviation department’s capital assets, net of accumulated depreciation, totaled approximately $1.01B
as of June 30, 2012. These capital assets consist primarily of land, buildings, and runways. Recent
project additions include land acquisition, runway improvements, and ticket lobby renovations. The
Airport currently has several improvement projects underway, including construction of a new hourly
parking deck and rental car facility. Capital assets are depreciated using the straight-line method over the
below useful lives assigned based on the asset category:
Category
Useful life
Buildings
25 years
Runways
33 years
Other Improvements
25 years
Machinery and Equipment
4-30 years
The Aviation department currently maintains a redundant capital assets system using an Access
database program. Aviation department maintains that this is required because the current general
ledger system (GEAC) does not provide sufficient detail for reporting. The Aviation department has
planned to utilize the City’s new ERP system to avoid the need for a redundant database.
The Aviation department has received grants from the Federal Aviation Administration, Transportation
Security Administration, and the American Recovery and Reinvestment Act. These grants are subject to
review by the grantor agencies and there are various reporting requirements and compliance aspects
associated with each grant.
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Background - continued
Contract Facility Charges
In May 2007, City Council adopted an ordinance imposing a CFC of $3.50 per rental car contract per
transaction day for all vehicles rented at the Airport, which can be periodically adjusted. On June 2, 2011
the City raised the CFC from $3.50 to $4.00 per transaction day to fund construction, maintenance and
operation of current and future car rental facilities. The Airport is in the process of constructing a
consolidated rental car facility, with an estimated cost of $85 million, intended to enhance customer
service, provide savings to the concessionaires and eliminate rental car concessionaire bus trips to/from
the Airport terminal. In November 2011, the Airport issued bonds secured by CFC and rental car
concessionaire guarantees with which to build this facility. The agreement requires that the rental car
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concessionaires remit the monthly CFCs collected on or before the 10 day of the next succeeding month
to U.S Bank National Association, the bond Trustee. CFC’s are applied each month in amounts and
priority as defined by the automobile rental concession agreements with the concessionaires.
CFC revenue amounted to $9.5M and $8.9M in fiscal years 2013 and 2012, respectively.
Airport Special Statements Reconciliation with the CAFR
Like all government agencies, the City is required to prepare an audited Comprehensive Annual Financial
Report (CAFR) for all of its governmental and business-type activities. The CAFR is generally due within
180 days of fiscal year end. In addition to the CAFR, the City files a special set of financial statements for
only the City of Charlotte Airport, and submits those annually to the Federal Aviation Authority (FAA).
The special statements are prepared after the CAFR, and are based upon CAFR inputs. However, there
are differences in the format the information is presented, as well as there are additional schedules
included in the special statements that are not required in the CAFR.
In addition to these audited financial reports, the FAA requires filing of the following forms on an annual
basis:
• Form 5100-126, Financial Governmental Payment Report.
The FAA requires sponsors to file Form 5100-126 as the annual report on revenue paid to other
units of government and on compensation the airport received for services and property provided
to other units of government, including in-kind services.
• Form 5100-127, Operating and Financial Summary.
The FAA requires sponsors to file Form 5100-127 as the annual report of their revenues,
expenses, and other financial information.
These forms are to be filed within 120 days after the end of their fiscal year. For the City, whose fiscal
year ends on June 30, the filing deadline is October 31 of each year. The FAA may grant an extension of
60 days after the filing date if audited financial information is not yet available by the filing due date. No
extensions can be granted past June 30 of the calendar year following the sponsor’s fiscal year end.
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Background - continued
Expense Reimbursements to the City
The City prepares an annual Cost Allocation Plan (CAP) in order to allocate general and administrative
overhead costs to the other departments of the City. The support departments and other designated
costs that are allocated include the following:
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Budget and Evaluation
Shared Services
City Attorney
City Manager
Engineering Building Maintenance
Engineering CMGC
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Finance
Human Resources
Equipment Depreciation/Financing
Facility Costs
Employee Costs and Retiree Insurance
Road Use Tax
These costs are allocated in a two-step process, first distributing the total support costs to all
departments, and then distributing the allocations from step one to the support departments to the service
departments. The method used to allocate the costs and calculate the amount allocated varies for each
support department, and is notated within the approved CAP. The Airport is considered a service
department, and support costs are allocated to the Airport as stipulated in the CAP. The CAP for FY2013
allocated $84.7 million in costs to all City Departments.
Debt Management
The Airport, in conjunction with the City, issues bonds in order to fund capital expansion and improvement
projects. These projects can also be partially funded by grants and other revenue sources. As of June 30,
2012, the Airport had $860.1 million in revenue bonds outstanding. There were 15 different series of
bonds outstanding, several with unspent proceeds for ongoing and future projects.
Debt payments each year for the Airport are approximately $59 million. There are multiple levels of debt
issued, with varying interest rates and allowable uses. The City and the Airport work very closely with
bond counsel and governing bodies, including the IRS, to ensure that the bond proceeds are used
properly and in accordance with all governing documents and regulations.
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Objectives and Approach
Objectives and Approach
Objectives
The overall objective of the Turn Over Review was to gain an understanding of the processes,
procedures and the control environment of high-risk core areas identified by management. We performed
a high level analysis and review, and made recommendations for improvement where considered
necessary.
Approach
Our audit approach consisted of the following phases:
Understanding and Documentation of the Process
This phase of our review consisted primarily of inspection and inquiry in an effort to obtain a foundational
understanding of the high-risk core areas. We met with representatives from the Aviation department and
the City to discuss the scope and objectives of the Turn Over Review, obtained preliminary data, and
established working arrangements. We also obtained copies of reports and other documents deemed
necessary. We then conducted facilitated sessions and interviews with representatives from the Aviation
department and City within the high-risk core areas identified by management. We documented our
understanding of the high-risk core areas in a process map/flowchart, where applicable, which was
subsequently validated by the parties noted above.
Process and Control Review
During this phase we assessed whether the controls are properly designed and made recommendations
on how to improve internal controls where deficiencies were identified. The following procedures were
conducted as a part of this phase of our review:
• Control design gap identification, where applicable;
• Identification of opportunities for new/modified controls for process improvement and/or efficiency
gains; and
• Development of recommendations for additional or improved controls.
Compliance and Controls Review
During this phase, we performed high-level sample testing of compliance and processes. Our procedures
included the following:
Revenue and Billing
Our review was limited to sampled terms and conditions of the selected contract, as well as the revenue
terms and conditions as it applied to the invoices selected. Not all revenue aspects and terms and
conditions of each selected contract were tested in this review.
• We selected a sample of eight revenue contracts and two invoices from each revenue contract
(one invoice from FY 2013 and one invoice from FY 2014) for testing. We developed a testing
matrix based on the relevant terms and conditions of the agreements;
• Reviewed lessees’ performance compliance with the certain terms and conditions of the contract;
• Conducted walkthroughs with the respective contract owners to obtain an understanding of their
contract monitoring process; and
• Compared the selected invoices to the contract to review for completeness and accuracy.
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Objectives and Approach - continued
Approach - continued
Internal Controls and Project Accounting and Capital Asset Accounting to include Grant
Budgeting & Accounting
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Obtained the contracts for a sample of two construction projects and verified the contracts were
properly executed;
Conducted walkthroughs with the project managers of the two selected projects to understand
their monitoring and review processes;
For the two selected projects, verified that all pay applications were on file, supported with
documentation, and contained proper approval documentation;
For a sample of two pay applications under each selected project, agreed amounts to the contract
and schedule of values and recalculated mathematical accuracy of the pay application;
For one pay application under each selected project, recalculated the mathematical accuracy of
the schedule of values;
Reviewed one change order for each of the selected construction projects to verify: proper
approval, mathematical accuracy of underlying schedules, compliance with contract terms and
conditions, and that the change order amounts were properly reflected in the pay applications in
our sample; and
Reviewed the closeout file for one selected completed construction project for completeness of
documentation.
Contract Facility Charge
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Obtained and reviewed a sample of CFC payments made by the rental car concessionaires into
to the trust accounts;
Tested selected rental car concessionaires’ compliance with the CFC terms and conditions of the
contract;
Tested payments received into the City’s CFC trust account as compared to the rental car
concessionaires’ monthly activity reports; and
Performed a walkthrough of CFC revenue payments/transfers from the CFC fund account to an
approved use of the CFC fund.
Airport Special Statements Reconciliation with the CAFR
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Reviewed FAA Compliance Manual for financial reporting requirements;
Discussed reconciliation process or lack thereof with City and Aviation department personnel;
Obtained and reviewed fiscal year ended June 30, 2012, audited Comprehensive Annual
Financial Report (“CAFR”);
Obtained and reviewed fiscal year ended June 30, 2012, City of Charlotte Airport Enterprise Fund
financial statements (“special statements”);
Compared CAFR and special statements for accuracy and developed listing of reconciling items.
Expense Reimbursement to the City
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Interviewed City Budget personnel on the process for developing the Cost Allocation Plan
(“CAP”);
Obtained copy of the CAP for FY 2013 and selected three departments for additional testing;
Interviewed the sampled departments to understand how their charges are accumulated and the
methodology for allocation in the CAP;
Obtained support for the FY2013 CAP for the selected departments and compared to the CAP for
accuracy, as well as evaluated the allocation methodology for reasonableness.
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Objectives and Approach - continued
Approach - continued
Debt Management
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Interviewed City Finance and Aviation department staff to understand the process for issuing
debt, setting up projects funded by debt, and tracking those projects;
Obtained a copy of the Financial, Debt Management and Accounting Policy for the Airport and
discussed the 2011 series debt in relation to that policy with personnel;
Obtained a listing of all projects funded by the debt, selecting one for additional testing;
For the selected project, obtained copy of project cost listing and support for all invoices coded to
that project, to determine whether the support was properly coded to that project.
Reporting
For each of the high-risk core areas reviewed, we identified observations and recommendations for
improvement where considered necessary. The observation matrix section provides the detail of the
observations identified and recommendations for remediation. We have assigned relative risk factors to
each observation identified. This is the evaluation of the severity of the concern and the potential impact
on the operations. There are many areas of risk to consider including financial, operational, and/or
compliance as well as public perception or ‘brand’ risk when determining the relative risk rating. Items are
rated as High, Moderate, or Low.
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High Risk Items are considered to be of immediate concern and could cause significant
operational issues if not addressed in a timely manner.
Moderate Risk Items may also cause operational issues and do not require immediate attention,
but should be addressed as soon as possible.
Low Risk Items could escalate into operational issues, but can be addressed through the normal
course of conducting business.
We have reviewed the results with the City’s Finance Director, Deputy Finance Director, Aviation Director,
Aviation Finance Director and other members of the City and the Aviation department’s management.
Included within the observation matrix is Management Response with the targeted implementation date
for remediation of recommended action items. We recommend that the City have follow-up procedures
performed for those observations where the remediation target dates have been reached, and ample time
has passed under the new process/control to verify and report the implementation status of the
recommendations to the previously reported observations. Follow-up is meant to validate, on a sample
basis, the effectiveness of the remediated controls of the previously reported observations.
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Observation Matrix
City of Charlotte, North Carolina
Turn Over Review
Billing and Revenue, to include Rental Agreements and Contract Management
Rating
High
Observation
1. Contract Administration
Aviation records show that over 200 revenue contracts are
administered.
The Aviation department has one (1)
employee, the Revenue Contracts Manager who is
responsible for administration of the revenue contracts. We
selected a sample of eight revenue contracts and two
invoices from each revenue contract (one invoice from FY
2013 and one invoice from FY 2014) for testing. We also
reviewed a sample of required periodic reporting
documentation as stipulated in the revenue contracts. Our
review was limited to sampled terms and conditions of the
selected contract, as well as the revenue terms and
conditions as it applied to the invoices selected. Not all
revenue aspects and terms and conditions of each selected
contract were tested in this review. We noted the following:
Independent Validation
Through discussions with the Aviation management and staff,
we noted that they do not independently validate or verify the
underlying supporting documentation received from the
lessee, which is the basis of invoicing for some lease terms.
For example, some lessee invoices are based on a
percentage of sales or profits.
Monitoring
Through our sample testing we noted the following contract
compliance issues in three of the eight contracts tested:
Hertz Rent-A-Car and Enterprise Rent-A-Car:
• The contract stipulates that the lessee is to provide year
to date gross revenues on a monthly basis. Per review of
the lessee’s monthly statements, only the previous
month’s results are provided.
• The contract requires that the lessee submit certified
annual statements of gross revenues and compliance
with CFC provisions. The Aviation department could not
provide documentation of receipt of these 2 reporting
requirements.
Recommendation
Management’s Response
As previously noted, the Aviation
department recently went through a
system conversion to PROPworks®, in
order to effectively manage their
revenue contacts. PROPworks® will
allow the Aviation department to
effectively track agreements and
leases, to compile information about
business relationships, to bill and
invoice
tenants
or
concession
operators, and to track service
providers and concessionaires for
compliance with agreements.
Response:
Aviation
agrees
with
recommendation.
As a point of
clarification, the Aviation department has
one
dedicated
revenue
contract
manager, but multiple other employees
responsible for managing certain
revenue
contracts.
The
Aviation
department is evaluating procedures for
its revenue contracts based, in part, on
the recommendations contained herein.
The Aviation department is currently
moving to a centralized model for
managing its revenue contacts. In
response to this initiative, Aviation is
creating an Airport Business Office
which will be responsible for revenue
contract management, leasing, tenant
negotiations, economic and business
development, among other things. The
total scope of the Airport Business Office
is under development.
We
recommend
the
Aviation
department perform the following:
• Inventory active revenue contracts
to determine completeness of
contract document files and followup on identified issues.
• Review contracts for outdated,
irrelevant, or unenforceable terms,
conditions,
or
clauses
and
consider them for removal.
• Compare the active contracts to
invoicing parameters to determine
accuracy and completeness of
invoices and follow-up on identified
issues.
• Utilizing PROPworks®, populate
contract terms, timing of price
escalations, and timing of periodic
review of contracts.
9
City of Charlotte, North Carolina
Turn Over Review
Billing and Revenue, to include Rental Agreements and Contract Management - continued
Rating
High
Observation
1. Contract Administration – continued
Contract Approval and Documentation
We noted the following contract approval and documentation
issues with three of the eight revenue contracts reviewed:
• Hertz Rent-A-Car: The 2nd Amendment to the contract,
dated August 2005, was not signed by the Aviation
department or the lessee.
• Continental Airlines:
The Aviation department was
unable to locate the contract or amendment to
substantiate the housekeeping services billings.
• The Paradies Shops, LLC: The trash removal costs are
not documented in the contract or amendments. The
trash removal costs are documented in a letter signed by
the Aviation department and sent to the lessee.
The absence of consistent, periodic monitoring and validation
of underlying support by the Aviation department limits their
ability to comply with responsibilities under lease and
concession terms and conditions.
Failure to perform
monitoring and validation opens the opportunity for control
weakness and prevents the deterrent effect such tests would
have.
Recommendation
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Utilizing
PROPworks®
tickler
system functionality, populate the
documents and timing of lessee
reporting required per the contract
terms.
Utilizing PROPworks®, if possible,
maintain copies of required lessee
reporting documentation, including
evidence of review by the contract
administrator.
Enforce lessee reporting and
documentation requirements, and
performance of timely follow-up.
Establish contract administration
procedures.
Implementation
of
the
above
recommendations
will
enhance
monitoring of contract activities and
help determine that terms of contracts
are adhered to.
Management’s Response
Validation/Monitoring
&
Contract
Approval/Documentation:
As noted in the recommendation,
Aviation
recently
implemented
PROPworks®, which is a contract
management and invoicing system in
connection with the City’s ERP initiative.
PROPworks® was activated on July 1,
2013 and is being utilized to enhance
contract management and for all Airport
invoicing. Aviation is currently populating
PROPworks® with contract terms
including price escalations and reporting
requirements. Aviation will also utilize
PROPworks®
tickler
system
to
maximize
contract
management
functionality.
10
City of Charlotte, North Carolina
Turn Over Review
Billing and Revenue, to include Rental Agreements and Contract Management - continued
Rating
High
Observation
1. Contract Administration – continued
Invoicing
We noted the following billing discrepancies per our review of
the lessee invoices as compared to the associated revenue
contracts:
DHL Global Business Services:
• Section 4.02(b) of the revenue contract states that facility
rent shall be an amount equal to the annual amortization
of the total cost of the Airport’s improvements over an
amortization period of 20 years. Per our re-calculation,
the monthly rental amount should be ~$35,397
(~$424,766 annually). The City’s rental calculation used
a 25-year amortization period, under which rentals have
been billed at $31,760 monthly ($381,120 annually) since
the contract inception date of June 21, 2006. This
amounts to an estimated monthly difference of ~$3,634.
The estimated shortage in billings to date is ~$323,700,
which would result in ~$1,032,078 in over billings at the
end of the contract.
• Section 4.01(c) of the contract states that the ground rent
amount will escalate every 5 years on the anniversary
date of building occupancy, which was June 21, 2006.
The ground rent has not been updated since the original
occupancy date of June 21, 2006. We re-performed the
rent calculation using historical Consumer Price Index
figures (CPI-U), and estimated the shortage in billings to
be ~$7,000 for the period from June 21, 2011 to
November 21, 2013.
Recommendation
Management’s Response
It is our understanding the Aviation
department is in process of followingup on these identified invoicing issues.
Invoicing:
Noted observation regarding DHL
contract has been confirmed and
resolved. Aviation has invoiced DHL for
ground rent identified in Observation.
Furthermore, DHL has executed a letter
of acknowledgement confirming 25 year
amortization term used to calculate
facility rental.
Estimated Completion Date:
The
creation of the Aviation Business Office;
establishment of contract administration
procedures;
and
completion
of
PROPworks® contract management
module updates are anticipated to be
complete by the end of Calendar Year
2014.
Responsible
department
Party:
Aviation
11
City of Charlotte, North Carolina
Turn Over Review
Billing and Revenue, to include Rental Agreements and Contract Management - continued
Rating
High
Observation
2. Right to Audit Clause
Through our testing of the revenue contracts we noted that
three of the eight revenue contracts sampled did not include
a right to audit clause and the Aviation department has not
previously exercised their right to audit. .
A right to audit clause is a good business practice for all
types of organizations, of all sizes. They support compliance
Carrying out
and allow for business partner oversight.
regular audits tends to build greater trust with contract
relationships. Also, it sends the message that the Aviation
department will be monitoring to determine compliance with
the contracting entity’s ethics or business standards and that
the entity is complying with the agreed upon contractual
relationship.
Recommendation
Management’s Response
We recommend that the Aviation
department perform the following:
• Review
all
active
revenue
contracts to determine which
revenue contracts are lacking a
right to audit clause and modify
where deemed necessary.
• Work with Airport Counsel to
determine if a right to audit clause
can be executed on revenue
contracts that have expired and
are currently month to month.
• Consider exercising right to audit
clauses on a periodic basis.
Response:
Aviation
agrees
with
proposed recommendation. All revenue
contracts will include a right to audit
clause.
Aviation
Revenue
Management/Airport Business Office will
conduct annual review and sample of
revenue contracts for consideration of
exercising right to audit.
Estimated Completion Date: Effective
Immediately
Responsible
department
Party:
Aviation
12
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting
Rating
High
Observation
3. Policies & Procedures
Based on interviews with Aviation management and staff, we
noted that there are no formal, documented policies and
procedures for the following:
• Pay application review process.
• Project Management
• Bidder selection Process
• Grant Compliance Reporting
• Change Order Process
Lack of documented policies and procedures increases risk
of errors and omissions, which could jeopardize the grant
funding. Further, centralized, standardized, and documented
policies and procedures provide vital information to
employees in the event of absences, employee turnover, or
other occurrences.
•
Grant application / funding process, which includes
requiring / facilitating Aviation Finance department’s
involvement early in the process with development in the
identification and analysis for funding the respective “live”
and “ready” capital projects.
Including Aviation Finance department earlier in the grant
funding / budgeting process is vital in providing a full and
detailed funding analysis to determine the financial viability of
the respective projects. This is especially vital since for most
grant (AIP) funded projects, Aviation is responsible for 25% of
the project cost. Further, centralized, standardized, and
documented policies and procedures provide vital information
to employees in the event of absences, employee turnover,
or other occurrences.
Recommendation
Management Responses
We recommend that the Aviation
department
develop
policies
and
procedures for the following:
• Pay application review process, to
facilitate
the
collaborative
participation of both Development
and Aviation Finance staff in the
process. Further, management and
staff should utilize a checklist to
document
reviews
and
reconciliations performed throughout
the pay application review process.
This checklist will serve both as
documentation of work performed
and as a reference to employees,
helping ensure proper review and
support of all payments pursuant to
contract terms and conditions. See
also recommendations #5.
• Project
management
process.
Further, management and staff
should utilize a checklist to
document key procedures from
project initiation to project closeout.
This checklist will serve both as
documentation of work performed
and as a reference to employees,
helping ensure proper compliance
with
project
management
requirements and duties as outlined
in internal policies and in compliance
with
the
Owner’s
project
management
responsibilities
stipulated in the contract.
Response: Aviation concurs with the
recommendation that it should develop
policies and procedures governing the
processes identified herein to ensure
efficient and effective operations and
minimize the impact of staff absences
and/or turnover.
The Aviation
department has recently implemented a
contract procurement process which
tracks the flow of all Aviation
department contracts from inception to
execution. Aviation Development has
integrated this form into its contract
workflow.
Aviation also agrees with the continued
collaborative participation with both
Development and Aviation Finance
departments and to develop and utilize
a checklist to document reviews and
reconciliations performed throughout
the workflow process.
13
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Rating
High
Observation
3. Policies & Procedures - continued
Recommendation
•
•
Bidder selection process that require
the collaborative participation from
the following Aviation departments
including Development, Finance,
Procurement and Legal staff in the
process. Further, management and
staff should utilize a checklist to
document bid process milestones
performed throughout the bidder
selection process. This checklist will
serve both as documentation of work
performed and as a reference to
employees, helping ensure proper
compliance with internal policies and
applicable
procurement
state
statutory and federal and / or state
grant requirements.
Grant compliance reporting process.
Further, management and staff
should utilize a checklist to
document key procedures from grant
pre-application to grant closeout.
This checklist will serve both as
documentation of grant monthly and
quarterly reporting timeline with key
activities performed and as a
reference to employees, helping
ensure proper compliance with grant
reporting required data criteria and
deadlines.
Management Responses
Estimated Completion Date: Aviation
estimates
development
and
implementation
of
recommended
checklists by the end of calendar year
2014.
Responsible
department
Party:
Aviation
14
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Rating
High
Observation
3. Policies & Procedures - continued
Recommendation
•
•
Management Responses
Change
order
process
which
documents the key steps of the
process and also comply with the
changes in work provision in the
contract documents. These change
order policies and procedures should
take into account recommendations
#6. Further, management may want
to establish a checklist as part of the
change order form, that includes, but
not limited to:
o Nature/purpose of the change
o Entitlement Determination
o AE drawings / input as needed
o Engineer input, as needed
o Cost, including support
o Impact on project schedule
Grant application / funding process
that facilitate the collaborative
participation of both from the
Aviation department’s Development
and Finance staff in the decisionmaking
process.
Further,
management and staff should utilize
a checklist to document reviews and
cash flow and other analysis
performed. This checklist will serve
both as documentation of work
performed and as a reference to
employees, helping to ensure the
financial viability of the respective
projects to be funded.
15
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Rating
High
Observation
Recommendation
4. Capital Projects & Grants – Shadow Capital Projects Cost Report
Based on interviews with Aviation management and staff, due We recommend that in collaboration
to various limitations of the City’s general ledger system with appropriate City management and
(“GEAC”), Aviation management and staff developed a staff and the ERP implementation
duplicative, redundant system - their own “shadow” system team that Aviation management and
(with ACCESS) to track capital project expenditures and appropriate staff should continue to be
funding.
included and significantly involved in
this ERP implementation process. This
For example, GEAC has limitations as it relates to the tracking
is especially vital as it relates to the
of grant funding vs. budgeted and actual disbursements by
capability and configuration of the
project. GEAC does not allow for the tracking of multiple grants
capital project accounting and grants
to one project. Further, GEAC does not provide Aviation
module to ensure that it best meets the
management and staff with the visibility needed to track project
functionality Aviation management
disbursements / expenditures real time in terms of measuring
needs to avoid continuing to run a
actual expenditures vs. budget etc.
duplicate,
redundant
and
costManagement indicated that the amounts as manually input into consuming capital cost projects
this shadow project cost system do not reconcile to the system.
amounts recorded in the GEAC system due to various factors
including timing differences and expenditures directly charged
to GEAC that are not communicated to Aviation Finance
department as well as various accrual and reversing journal
entries. Based on conversations with Aviation management, we
understand that a new ERP system (MUNIS) is being
implemented and is projected to go live during calendar year
2014.
Management Responses
Response: Aviation is fully integrated
with City Finance and the ERP team in
connection with the implementation of
the City’s ERP initiative. Aviation
participates in regular ERP coordination
meetings and conducts internal weekly
review and status meetings and
maintains a Readiness Checklist to
ensure
successful
project
implementation.
Aviation
is
involved
with
the
development and configuration of the
capital project and grant accounting
module
to
be
implemented
in
connection with the ERP initiative. The
implementation of Munis ERP will
negate the need for Aviation to avoid
running a duplicate project capital cost
report.
Estimated Completion Date:
ERP
Munis is currently projected to ‘go-live’
in July 2014.
Responsible
department
Party:
Aviation
16
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Rating
High
Observation
5. Pay Applications Review and Approval
Pay Application Review
Based on interviews with Aviation management and staff,
management does not review the mathematical accuracy of the
monthly pay applications as part of the review process. In our
review of two pay applications for the Rental Car Facility
(“RCF”) and Hourly Parking Deck project, we noted that there is
a complex detailed schedule of values that includes multiple
funding sources that need to be allocated based on
contractually agreed upon percentages.
We did note some mathematical inaccuracies in the four pay
applications selected for the two construction projects tested,
as follows:
RCF and Hourly Parking Deck:
Pay Application 7:
• The percent complete calculations on the schedule of
values do not include the stored material amounts. This
caused the percent complete to be understated for 8 line
items.
• On the schedule of values, the "Work completed This
Period," "Balance to Finish," and "Retainage" totals do not
include the last line item on the original contract section
(Gasoline Fueling System Labor, under Division 33 Utilities). This caused the retainage amount to be
understated by $683.57, which affected the total amount
due by this same amount.
Recommendation
Management Responses
Pay Application Review/Approval/
Sign Off’s
We recommend that the Aviation
department implement controls in the
pay application review process that
includes:
• Recalculating the roll-up of the
schedule of values for each
monthly pay application
for
accuracy of the amounts being
billed;
• In the case of multiple funding
sources, this will mitigate the risk
of misappropriation of funds to the
relevant costs; and
• Documentation of the review and
approval steps in the pay
application review process.
Response:
Pay Application Review:
Aviation
agrees
with
this
recommendation. After approval of the
Schedule of Values submitted by the
contractor, the final format for pay
applications will be created individually
for each project by the Aviation project
manager. To ensure that formulas and
or change order work is not edited by
the contractor, the project manager will
create an excel pay application with all
line items and formulas and password
protect the pay application for
contractor use. If the pay application
needs to be edited, the Aviation project
manager will revise the pay application,
password protect it, and resend to
contractor for their use.
Retainage
Percentage
not
Consistent with Contract Terms
We recommend that the Aviation
department implement a control in the
pay application review process that
includes reviewing the retainage
amount for each monthly pay
application
for
accuracy
and
consistency with the contract terms.
17
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Rating
High
Observation
5. Pay Applications Review and Approval – continued
Pay Application Review - continued
RCF and Hourly Parking Deck - continued:
Pay Application 7 - continued:
• The cost allocation calculations were not completed for the
last line item of the original contract section (Gasoline
Fueling System Labor, under Division 33 - Utilities).
• The percent complete is not calculated correctly for two
change order line items (“ASI-001 Owner Contingency” and
“Bulletin-007 Revisions to RCF deck fueling system”).
• The “balance to finish” is not correct for the last line item of
the change order section ("Bulletin-007 Revisions to RCF
deck fueling system"), which also affected the total change
orders amount.
Recommendation
Management Responses
Estimated Completion Date: Aviation
estimates
development
and
implementation
of
recommended
checklists by the end of calendar year
2014. Missing review/approval sign-offs
and
retainage
percentage
recommendations will be effective
immediately.
Responsible
department
Party:
Aviation
We noted that the above errors were corrected on the
subsequent pay application in our sample (22).Pay App 22:
•
Retainage was not calculated on the change orders. This
caused the retainage to be understated by $46,732.
Runway Reconstruction:
Pay App 9:
•
The Schedule of Values shows the total contract sum as
shows
$24,602,357.68;
the
pay
application
$24,099,003.68. We were not able to reconcile these two
figures.
Lack of review of mathematical accuracy in the Schedule of
Values or inaccurate allocation of the costs among funding
sources can lead to inaccurate billings and / or
misappropriation of funding sources.
18
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Rating
High
Observation
5. Pay Applications – continued
Missing Review/Approval Sign-Off’s
We noted the following approval or review sign-offs were not
documented on the pay applications for the 2 selected projects:
• Rental Car Facility and Hourly Parking Deck pay
applications 5 and 9 did not contain evidence of Project
Manager approval or review.
• Runway Reconstruction pay applications 2 and 9 did not
contain evidence of Assistant Director for Development
approval or review.
Lack of required sign-offs prevents accountability and
represents a weakness in internal controls over review and
verification of the pay application accuracy.
Retainage Percentage Not Consistent with Contract Terms
The retainage percentage on application and certificate for
payment 9 for the Runway Reconstruction project was 2%,
which is not consistent with the contract terms.
Section 90-06 of the contract Terms and Conditions covers
retainage, and states the following: "From the total of the
amount determined to be payable on a partial payment, ten
(10%) percent of such total amount will be deducted and
retained by the Owner until the final payment is made. When
not less than 95 percent of the Work has been completed the
Engineer may, at his/her discretion and with the consent of the
surety, prepare an estimate from which will be retained an
amount not less than twice the Contract value or estimated
cost, whichever is greater, of the Work remaining to be done."
Withholding retainage at the contractually stipulated
percentages provides the Owner with financial leverage to
ensure the project is completed timely and according to plans
and specifications. By forgoing this practice and electing to
significantly reduce the percent retained, the Owner weakens
its overall position with respect to its fiscal and operational
relationship with the Construction Manager.
Recommendation
Management Responses
Response - continued:
Missing Review/Approval Sign-offs:
Aviation agrees with recommendation.
Aviation will address this observation as
follows: (1) once finalized by the project
manager and contractor, the project
manager will sign the pay application
signifying her review and approval of
the contracts; and (2) the pay
application will then be forwarded to
either the Assistant Aviation Director –
Development, Deputy Aviation Director
or Aviation Director (depending on
availability) for final review and
execution.
Retainage Percentage no Consistent
with Contract Terms:
Aviation acknowledges the tested
contract’s retainage provision was
misapplied
in
this
instance.
Development, in cooperation with Legal,
will ensure that the retainage provision
is properly applied moving forward.
Furthermore, in November 2013
Aviation has hired a full-time project
cost and grant accountant who will
assist in the review and accurate
confirmation of retainage.
Estimated Completion Date: Effective
immediately.
Responsible
department
Party:
Aviation
19
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Rating
High
Observation
6. Change Order Process
Approval Thresholds
We noted that City Council review and approval is required for
change orders greater than $100,000.
Mark-up not specified in contract
We selected 2 projects for review. For the RCF and Hourly
Parking Deck project, we reviewed the 5 change orders
executed or proposed to date. We noted that for all proposed
change orders, mark-up was included, but no amount or
percentage was specified in the contract
Lack of documentation related to mark-up for additive change
orders can lead to unauthorized and / or excessive charges.
Recommendation
Management Responses
Approval Thresholds
We recommend that the requirement
of City Council review and approval of
change orders greater than $100,000
be increased to a threshold amount
more appropriate to maintain efficiency
of operations.
Response: The Aviation Department
will work with the City regarding the City
Council threshold requirement.
Mark-up not specified in contract
We recommend that the Aviation
department require the documentation
of contractor and subcontractor markups in the contract documents.
If the change order enlarges the project
budget by adding additional scope,
labor or materials, Aviation would
present the Change Order to the City
Manager or Charlotte City Council as
required by the City’s procurement
policy.
This will mitigate the risk of
unauthorized and / or excessive markup fees for change orders.
20
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Rating
High
Observation
6. Change Order Process - continued
Proposed Change Order - Purpose, Entitlement and
Supporting Documentation
We selected 2 projects for review. For the RCF and Hourly
Parking Deck project, we reviewed the five change orders
executed or proposed to date. We noted that for all proposed
change orders, the entitlement determination, cost support,
including AE review and input is not included in the proposed
change order (“PCO”) documentation reviewed by the Aviation
Assistant Director and / or Deputy Director, Aviation Director,
City Manager and City Council as applicable for authority
threshold approval requirements.
Lack of documentation related to entitlement and detailed cost
support for additive change orders can lead to unauthorized
and / or inappropriate charges.
Recommendation
Management Responses
Proposed Change Order - Purpose,
Entitlement
and
Supporting
Documentation
We recommend that the Aviation
department require the following as
part of the change order forms and
process:
• Inclusion of clear description and
documentation as to the purpose
and nature of the change in the
determination of entitlement
• Making the PCO support related to
submittal of the proposed change
order available electronically (such
as via Sharepoint,etc) for the
various levels of review from the
Aviation Assistant Director and / or
Deputy Director, Aviation Interim
Director, City Manager and City
Council as required by the
approval thresholds
Response - continued:
Mark-Up:
Aviation
agrees
with
the
recommendation. Aviation will include a
suitable mark-up provision consistent
with the recommendation.
This will mitigate the risk of
unauthorized and / or unsupported
charges through the review and
approval by the appropriate authority
from Aviation Interim Director to City
Council.
Change Order Process:
Aviation’s standard form change order
requires a brief description of the work
captured in the change order. Failure to
include a description in this case would
have been an oversight.
Aviation
agrees
that
entitlement
determination, cost support and AE
review are necessary in connection with
change orders. However, Aviation does
not believe that change orders include
back up documentation when delivered
to management for execution. All backup documentation is filed for easy
access in the event additional
information is required. The project
manager (who has the greatest
knowledge of the project) prepares
each change order and serves as a
staff resource for the Aviation Director,
City Manager or Charlotte City Council
prior to consideration and approval of
the change order.
21
City of Charlotte, North Carolina
Turn Over Review
Internal Controls and Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Rating
High
Observation
6. Change Order Process - continued
Recommendation
Management Responses
Response - continued:
Change Order Process - continued:
Development does not believe that
attaching back up documentation to the
change order would be effective
because the party responsible for
execution does not typically have the
time or depth of understanding of the
relevant project to sort through
voluminous back up documentation.
The staff resource can answer any and
all
questions
quickly
and
comprehensively as needed.
Estimated Completion Date: Effective
immediately.
Responsible
department
Party:
Aviation
22
City of Charlotte, North Carolina
Turn Over Review
Contract Facility Charge
Rating
Moderate
Observation
7. Automobile Rental Concession Agreements
Concessionaire Compliance with Contract Terms and
Conditions
The automobile rental concession agreements require that the
rental car concessionaires remit the monthly CFCs collected on
th
or before the 10 day of the next succeeding month to U.S
Bank National Association, the bond Trustee. We selected 2
automobile rental concession agreements and 2 months of
CFC remittances to the trustee noting the following:
•
•
•
Although the rental car concessionaires currently submit
monthly CFC activity summaries, this is not a requirement
per review of the automobile rental concession agreements
dated November 1, 2011. However, this is a requirement
per review of City Ordinance Section 4-38 dated July 1,
2007.
Neither rental car concessionaire selected had submitted
th
their remittances to the trustee on or before the 10 day of
the succeeding month, as required by the automobile rental
concession agreements. For one month, one rental car
concessionaire did not submit their remittance to the trust
nd
until the 2 succeeding month.
The Aviation department receives monthly CFC summaries
from the rental car concessionaires; the City’s Central
Finance department receives the monthly CFC trust
statements, posts the CFC to the general ledger and
performs the bank reconciliation. Although we did not note
any exceptions of rental car concessionaire remittances to
the trustee as compared to the monthly CFC activity
summaries provided by the rental car concessionaires,
there is no internal verification/reconciliation of the CFC
activity summaries to the CFC trust statements performed
by the City’s Central Finance department nor the Aviation
department.
Recommendation
Concessionaire Compliance with
Contract Terms and Conditions
We recommend that the Aviation
department:
• Update the automobile rental
concessionaire agreements, by way
of
letter
of
agreement,
memorandum of understanding or
the like, to include the requirement
that the rental car concessionaires
submit monthly CFC
activity
summary reports and reporting
detail showing the length of the
rental period for each transaction,
for monthly review.
• Develop
a
standardized
concessionaire monthly reporting
form that provides sufficient detail to
determine if gross receipts and
other necessary items are correctly
reported and include the form as an
appendix to the agreement with the
concessionaires.
• Review the CFC activity summary
reports against the reporting detail
provided by the rental car
concessionaires and spot check to
determine if CFCs are computed in
accordance with the automobile
rental concession agreement.
Management’s Response
Response:
Aviation agrees with
recommendation.
Aviation
management has discussed this with
senior managers of the prospective
rental car companies.
These
representatives expressed doubt as
to whether the findings are reflective
of a systemic failure to comply with
reporting requirements. Given the
press of time in formulating this
response, Airport Management has
not conducted an independent
investigation to determine and
document the scope of such
observed irregularities. Nevertheless
the Rental Car Companies agreed to
execute a letter provided by Airport
management reciting the reporting
requirements and agreeing to strictly
comply with them going forward.
Airport management is in the process
of preparing such a letter and will
send
it
to
the
rental
car
concessionaires and follow up with
them on its execution and return.
Management will also instruct its
contract manager to periodically
review
monthly
reports
for
completeness and adherence to
requirements and will enforce the
rental car companies reporting
requirements.
23
City of Charlotte, North Carolina
Turn Over Review
Contract Facility Charge - continued
Rating
Moderate
Observation
Recommendation
7. Automobile Rental Concession Agreements – continued
Concessionaire Compliance with Contract Terms Concessionaire
Compliance
and Conditions – continued
with Contract Terms and
A full reconciliation of the supporting documentation to Conditions – continued
the CFC trust statements and general ledger offers • Obtain the monthly trust
checks/balances and a means to detect errors in the
statement, bank reconciliation
CFCs remitted. Failure to perform a timely review to
and general ledger detail from
supporting documentation may cause delays in the
the City’s Central Finance
identification of potential issues and / or irregularities.
department and compare and
reconcile the monthly CFC
Use of CFC Per Automobile Rental Concession
activity reports received from
Agreement
the rental car companies.
Currently, remaining CFCs are used to pay the monthly
facility rent charges for the rental car concessionaires. Use of CFC Per Automobile
This is allowed per 6 e) of the City Ordinance.
Rental Concession Agreement
We recommend that the Aviation
”The City shall use the proceeds of the CFC to
department modify the automobile
compensate the City for any amounts due the
rental concession agreements
City from and not other paid by the Tenant
and/or City Ordinance for CFC to
RACs pursuant to the concession agreements
with
current
correspond
and facility leases in effect between the City
concessionaire
business
and the Tenant RACs.”
practices, where needed.
This provision is not defined in the 2 selected
automobile rental concession agreements dated
November 1, 2011.
Management’s Response
Response - continued:
(1) Management will develop a standardized
monthly reporting form for the concessionaires to
use in complying with their reporting requirements.
(2) Management will conduct regular periodic
testing of the monthly reports to measure
compliance with reporting requirement and to
determine whether CFCs are being calculated
correctly.
(3) Management will conduct regular periodic
testing of the monthly reports to measure
compliance with reporting requirement and to
determine whether CFCs are being calculated
correctly.
(4) In March 2014, City Finance provided Aviation
with monthly CFC deposit statements from the
Trustee from July 2013 through February 2014.
Finance will continue to provide copies of CFC
deposit statements from the Trustee. Aviation will
review the monthly Trustee statements and
identify any discrepancies with CFC Reports
received from the Rental Car Companies.
(5) Aviation proposes to address recommendation
regarding use of CFC in rental car concession
agreement via letter acknowledgement rather than
formal amendment to the Rental Car Concession
Agreement.
Estimated Completion Date:
Rental car letter acknowledgement will be
provided to Rental Car Concessionaires by June
30, 2014.
Responsible Party: Aviation department
24
City of Charlotte, North Carolina
Turn Over Review
Airport Special Statements Reconciliation with the CAFR
Rating
Moderate
Observation
Recommendation
Management’s Response
8. Reconciliation of CAFR to Airport Enterprise Fund Financial Statements
During the course of our review, we noted that there is no We recommend that the City’s Central Finance Response: Aviation generally
formal reconciliation between the City’s audited CAFR and and
Aviation
departments
perform
a agrees with recommendation.
the stand-alone financial statements of the Airport (“special reconciliation between the audited CAFR and Aviation is collaborating with the
Central
Finance
statements”), which are submitted annually to the FAA. We the stand-alone special statements of the City’s
did note the City maintains a series of folders and support airport. The reconciliation should include a department in developing a plan
for specific items within the CAFR and stand-alone summary of variances and where the amounts to address this recommendation.
statements, and that the both statements are audited and were obtained, and any schedules that are Aviation is requesting clarification
certain
portions
of
agree in the aggregate. The key reconciling items noted included in the special statements that are not on
part of the audited CAFR should be tied to the recommendation.
relate to the following:
• Statement of Revenues, Expenses and Changes in Net City’s final adjusted / audited trial balance.
Estimated Completion Date: In
Assets included in the special statements, where the This could be accomplished by utilizing the
conjunction with the FY 2015
breakdown of operating expenses into service areas new ERP system’s chart of accounts to include
audit.
agrees in total to the CAFR (page 44) but the categories special segment codes or other designators in
Aviation
vary from the City’s trial balance and the differences are order to accumulate the cost allocations for the Responsible Party:
not explained. We were unable to reconcile the items by special statements and reduce the need to re- department in conjunction with
enter all transactions into a secondary system the City’s Central Finance
reviewing the City’s trial balances.
department
• Schedule of Changes in Net Assets – Included and for reporting purposes.
Excluded Centers is not a statement required in the
CAFR but is submitted with the special statements. As Both reports include a footnote disclosure for
such, the City’s trial balance activities must be parsed in the definition and calculation of the passenger
order to accumulate the data. Given the variances in facility charges revenue. Due to the
operating expenses noted above, the included/excluded significance and complexity of airport
operations, the City should also consider
amounts could not be determined.
• Schedules of Cash Deposits and Withdrawals are not including a footnote disclosure in both reports
statements required in the CAFR, but are submitted with related to the contract facility charges revenue
terminal
revenue
the
non-airline
the special statements. As such, the City’s trial balance and
expenses,
for
informational
activity must be parsed in order to accumulate the data. distribution
Total ending balances included on the schedules does purposes.
not agree to the cash and investments reported on the
Statement of Net Assets, which agrees to the audited
CAFR. These variances should be reconciled.
It should be noted that our procedures did not include
reconciliation of the CAFR and special statements to the
FAA required financial reports described in the next issue.
25
City of Charlotte, North Carolina
Turn Over Review
Airport Special Statements Reconciliation with the CAFR - continued
Rating
Low
Observation
Recommendation
9. Timing of Submission and Reconciliation of Financial Reports to the FAA
We noted during our review that the FAA Compliance Manual We recommend that the Aviation
requires their Forms 5100-126 and 5100-127 to be submitted department, in conjunction with the
City’s Central Finance department,
within 120 days of fiscal year end.
evaluate the benefits of filing the FAA
Per discussion with the Aviation department’s Finance required financial forms utilizing
Manager, these forms are historically completed based upon unaudited statements, and then
the audited CAFR and special enterprise fund financial reconciling the statements once the
statements of the airport. The CAFR and the special CAFR and special statements are
statements, however, are not required to be completed until issued.
180 days after fiscal year end.
At a minimum, the procedures for
This timing requires the airport to obtain a filing extension preparing the Forms 5100-126 and
from the FAA each year. These extensions are generally for 5100-127 should be documented and
60 days. It should be noted that the FAA requires the forms reconciled to the special statements
to be completed by the deadline and notated as “unaudited” if and/or CAFR each year.
the audited financial statements have not been received.
Later, if the audited financial statements report significant
changes, there is a process for amending the forms.
Management’s Response
Response:
Aviation
agrees
with
recommendation. Aviation has initiated
the compilation of revenue and expense
data needed for FAA Financial Reports
using unaudited revenues and expenses
from the general ledger. Aviation will
prepare reconciliation between FAA
Financial Reports and the Special
Statements and/or CAFR. Aviation is
consulting with City’s Central Finance
department and Bond Counsel to
confirm whether any limitations exist
with respect to posting unaudited
financial information due to potential
concerns from existing and prospective
investors of Airport revenue bonds who
may use this information for credit
evaluation.
Estimated Completion Date: May 12,
2014
Responsible Party:
Aviation
department in conjunction with the City’s
Central Finance department and Bond
Counsel
26
City of Charlotte, North Carolina
Turn Over Review
Expense Reimbursement to the City
Rating
High
Observation
10. Methodology Documentation and Monitoring
During our interviews and review of support for a selected sample
of services allocated, we noted the following with respect to the
City’s overall Cost Allocation Plan process:
Ownership of the CAP
1. The Budget & Evaluation Department accumulates the CAP
data into a final report for approval, but is not responsible for
the accuracy of the data. Each allocated agency works with
the Budget & Evaluation Department to establish a
methodology, then calculates their own allocation on using
the agreed-upon methodology. The agency enters data into
the Clarity system for inclusion in the overall plan. The
support for the calculation and methodology is not
consistently reviewed outside of each agency, but the output
is reviewed by the Budget & Evaluation Department prior to
being published in the annual cost allocation plan.
Consistent Documentation of Personnel Activity Costs
2. The agencies that allocate charges based upon an estimate
of the staff time spent supporting each department are not
consistent in the way the time estimate data is collected and
documented. There is no prescribed format for time and effort
tracking and there is no standardized monitoring or analysis
of the amounts reported. Federal guidelines, under OMB
Circular A-87, Attachment A, require an accurate tracking of
staff time spent in indirect activities for the purposes of cost
allocation for federal programs, and FAA guidelines require
the City’s CAP follow OMB Circular A-87.
Documentation of CAP Methodologies by Department
3. We reviewed the methodology and support for $20 million
(24%) of the CAP for FY 2013, consisting of Finance,
Information Technology and Procurement, noting that the
allocation methodologies for those agencies appear to be
based upon reasonable units of measurement, but that the
supporting documentation, as noted above, is not consistent
and not always available. The allocation amounts are based
upon budgeted amounts and are also not evaluated against
actual amounts, as described below.
Recommendation
We recommend the following related to
oversight and monitoring of the CAP:
1. The CAP should be owned by the
City’s
Budget
&
Evaluation
Department,
to
include
documentation and evidence of the
agreed-upon approval by Budget
and each agency of how each
allocation is performed, and
including a description of each
indirect account that is allocated.
Each agency should still be
responsible for calculating and
entering the data into Clarity, but
the support should be provided
and reviewed by the City’s Budget
office for reasonableness and
accuracy.
2. A prescribed format and reporting
period for time and effort tracking
should be developed, approved
and consistently implemented to
provide sufficient support for staff
time estimates. OMB Circular A-87
outlines how this should be done.
The City’s PeopleSoft is currently
used for assigning time staff time
to projects and formal procedures
and employee training can be used
to complete these tasks.
3. CAP support should be retained
under
the
same
document
retention requirements for public
records
requests,
or
other
regulatory
requirements
as
applicable, if different for the
Aviation department.
Management’s Response
Response: The City agrees with
this recommendation. City Budget
and Evaluation will collaborate with
the
City’s
Central
Finance
to
develop
and
department
implement procedures to document
and monitor the CAP.
Estimated
Completion
Date:
Draft procedures are estimated to
be in place by October 31, 2014.
Responsible Party:
Aviation
department in conjunction with the
City’s Central Finance department
and City Budget and Evaluation
27
City of Charlotte, North Carolina
Turn Over Review
Expense Reimbursement to the City - continued
Rating
High
Observation
11. CAP Approval
Chapter 15 of the FAA Airport Compliance Manual allows the
City to allocate certain indirect costs to the airport. The
manual states: “In an acceptable cost allocation plan, the
sponsor allocates costs in a manner consistent with
Attachment A to Office of Management and Budget (OMB)
Circular A-87 except substitute the phrase “airport revenue”
for the phrase “grant award” wherever the latter phrase
occurs in Attachment A.”
The City’s CAP has not been approved by the City’s federal
cognizant agency for approving indirect cost allocation plans
in relation to federal grant awards. The methodologies and
documentation for these cost allocations can vary from the
federal guidance, but variances must be approved by the
City’s federal cognizant agency, which is the federal agency
responsible for reviewing, negotiating, and approving cost
allocation plans or indirect cost proposals. According to the
City’s Budget office, the City’s cognizant agency is the
Federal Transit Administration.
Recommendation
Management’s Response
In addition to the methodology
documentation
and
process
improvements described elsewhere,
we recommend that the City obtain
approval of the overall cost allocation
plan.
Response:
City agrees with this
recommendation. City Budget and
Evaluation will submit proposed CAP to
the Federal Transit Administration for
approval.
This approval should be obtained in
accordance with OMB Circular A-87,
evaluated by the City’s cognizant
agency
(Federal
Transit
Administration), and submitted to the
FAA for informational purposes.
Estimated Completion Date: City
Budget and Evaluation will provide a
CAP to the FTA by October 31, 2014, to
seek approval for the FY2016 Budget
cycle
Responsible Party:
Evaluation
City Budget and
Approval of the CAP can also serve as documentation for the
allocation of direct and indirect costs to federal award
programs, as allowable by those programs.
28
City of Charlotte, North Carolina
Turn Over Review
Expense Reimbursement to the City - continued
Rating
Moderate
Observation
12. Basis for Cost Allocation Plan
OMB Circular A-87 requires certain documentation and
periodic true-up (after the fact analysis) of indirect cost
allocations against actual amounts, in order to determine
whether the amounts allocated were correct. Under OMB
Circular A-87, estimates do not qualify as support for
charges, but can be used for interim accounting purposes. If
that occurs, the agency must:
• Use a reasonable method for establishing the estimates;
• Compare actual costs to budgeted distributions at least
quarterly; and
• Reflect adjustments accordingly to reflect changed
circumstances.
The City’s CAP is based upon amended budgeted amounts,
rather than actual amounts. The CAP for FY 2013 was based
upon final amended budgets for FY 2011, approved during
FY 2012, and implemented in FY 2013. As such, the between
budget and actual variances may not be material.
Recommendation
Management’s Response
We
recommend
that
actual
expenditures be used as the basis for
the CAP.
Response: The City agrees with this
recommendation. In collaboration with
Aviation, Finance, and other City
departments,
City
Budget
and
Evaluation will use actual expenditures
as basis for CAP pursuant to OMB
Circular A-87.
Estimated Completion Date: TBD
While the City continues to use the
budgeted amounts, we recommend the
quarterly comparisons are made, with
adjustments as needed, in accordance
with the guidance.
Responsible Party:
Aviation
department in conjunction with the City’s
Central Finance department,
City
Budget and Evaluation and other
application City departments
The City does not modify the CAP during the year, and there
has not been a comparison of actual costs against the CAP
since FY 2011, per discussion with the Budget office. As
such, the City is not routinely performing a true-up analysis of
indirect allocations.
29
City of Charlotte, North Carolina
Turn Over Review
Debt Management
Rating
High
Observation
Recommendation
13. Bond Funded Project Invoice Support, Coding and Tracking
In order to evaluate whether the bond proceeds were properly In order to facilitate compliance with
used, we selected one project and tested the supporting the bond resolution and tracking of
documentation for validation that charges were coded to the the use of proceeds in accordance
correct project. The project selected was “East Terminal with IRS guidelines, we recommend
Expansion” #55509, which was substantially complete at the that project invoices include billing
time of testing. This project was fully funded by the 2011 for one project only, include any
Series B bonds.
relevant purchase order and contract
information,
and
supporting
During our testing, we noted the following:
documentation for amounts billed.
• One invoice for $695 was for a different project, but was
improperly coded to 55509.
Specifically
related
to
Direct
• One vendor routinely performs project management for Payments that do not have a
multiple projects at the airport. The vendor’s invoices were corresponding purchase order or
initially coded to a generic “Project Management” project contract, the invoices should include
cost center, and then later allocated to specific projects. For additional details either from the
the project selected, 7.61% of the total costs were vendor or the Aviation department on
allocated, but there is no support for how the allocation was how it was determined that the
determined and calculated. The contract did not specify an invoice was for the selected project,
especially in instances where the
allocation, and should be based on actual time spent.
• One vendor billed more than one project on the invoice and description of the work does not
match the airport’s internal project
Aviation used square footage for the allocation.
• One invoice for $3,822.50 was properly coded, but did not description.
include a stamp for approval of the payment and coding.
• Multiple instances where the supporting invoice did not Further, the Aviation department
reference “East Terminal Expansion”, making it unclear and/or the City’s Central Finance
should
consider
whether the invoice was properly coded. Where a purchase department
order or contract number was provided, we obtained a copy periodically sampling project invoices
of the additional documentation and determined that the from the project cost reports and
project was East Terminal Expansion. There were 4 verify that the amounts were coded
payments, totaling $29,658.69, that were direct payments to the correct project and that
documentation
is
and additional support (such as a PO or contract) was not supporting
sufficient.
available for testing.
• The prime contractor on the project did not provide
subcontractor invoice support in order to validate that the
subcontractor properly billed for the correct project.
Management’s Response
Response:
Invoicing:
Aviation
generally
agrees
with
recommendation. In the circumstance
where a contractor is involved with more
than one project, Aviation will request
current contractors provide Aviation with
individual invoices for each discreet
project.
If
contract
terms
or
circumstances
prevent
individual
invoices, Aviation will request contractor
provide invoice with line-item detail for
each discreet project.
Aviation Finance will periodically sample
project invoices and verify that amounts
coded to the correct project.
In
November 2013 Aviation has hired a
full-time project cost and grant
accountant who will assist in the
sampling of invoices to confirm project
coding.
30
City of Charlotte, North Carolina
Turn Over Review
Debt Management
Rating
High
Observation
Recommendation
13. Bond Funded Project Invoice Support, Coding and Tracking - continued
Management’s Response
Response - continued:
Direct Payments:
The implementation of the Munis ERP
does not allow for the use of Direct
Payments to pay vendors. For nonconstruction contracts/purchase orders,
Munis will require a three way match
(Purchase
Order
or
Contract
/Invoice/Receiving Confirmation) to pay
vendor. Current direct payments will
require requisition entry and purchase
order conversion. Change orders for
construction contracts will require
requisition
and
purchase
order
conversion, but will not require the three
way match.
Estimated Completion Date: Aviation
will develop an invoice sampling and
testing schedule by the end of June
2014.
Responsible
department
Party:
Aviation
31
City of Charlotte, North Carolina
Turn Over Review
Debt Management - continued
Rating
Moderate
Observation
Recommendation
14. Financial, Debt Management and Accounting Policy for the Airport
Project Review and Tracking Procedures
Project Review and Tracking
During our discussions with management, and review of the Procedures
Financial, Debt Management and Accounting Policy for the We recommend that the City’s
Airport, we noted that invoices are not periodically sampled and Central
Finance
department
tested for proper project coding for projects funded by bonds or periodically sample invoices for
grants. Given the nature of the various funding sources and the projects that are funded with debt
extent of projects underway at the airport, additional scrutiny proceeds or grant funds, and test
whether the expenses were coded to
should be paid to these expenses.
the proper projects, and have
Like all City departments, the Aviation department is responsible adequate support.
for coding/assigning vendor invoices to the correct projects.
Although invoices are selected for testing during the annual Further, we recommend the City’s
external audit, the depth of the testing does not trace the Financial, Debt Management and
expenses back to the specific funding source (i.e., which series of Accounting Policy be updated to
bonds was used). The City and the Aviation department do include this task, including the
review total expenditures by project on a monthly basis, and frequency of testing.
compare the totals against the project budgets.
Unused Bond Proceeds
There are projects that are served by more than one vendor, and We recommend that the Aviation
there are vendors that serve more than one project, increasing department and the City’s Central
the risk that the vendor invoices do not contain adequate detail in Finance department prepare a
summary memorandum of the bond
order to allocate the costs to the correct project.
proceeds that are unspent, the
Unused Bond Proceeds
original planned uses and the
During review of the of airport special statements, we noted there allowable uses, based upon IRS
are multiple series of bonds with unused proceeds yet to be rules and regulations, and the
spent, including from 2004, 2007, 2010 and 2011 series bonds. options available to the Airport/City
The City’s Financial, Debt Management and Accounting Policy for for the future use of those funds.
the Airport requires bond funds to be spent within 3 years, or a
written memorandum of explanation to the City’s Finance Director We further recommend that, based
must be prepared by the Aviation department, and Bond Counsel upon the summary, management
confer with Bond Counsel and
would be consulted as appropriate.
develop an action for the appropriate
A memorandum of understanding has not been prepared for any future use of those funds.
of the unspent bond proceeds that are not currently attached to
committed projects.
Management’s Response
Response: Project Review and
Tracking Procedures:
Aviation Finance will periodically
sample project invoices and verify
correct project funding source.
In
November 2013 Aviation has hired a
full-time project cost and grant
accountant who will assist with the
sampling of invoices. Furthermore,
implementation of Munis ERP will
provide a project cost and grant
module that will provide for more
accurate management and accounting
of project funding sources, including
those funded with general airport
revenue bonds.
Unused Proceeds:
Aviation agrees with recommendation.
In collaboration with City Finance –
Treasury, Aviation will prepare a
summary of the bond proceeds that
are unspent and develop a plan for
use of unused bond proceeds. Said
plan will be prepared in accordance
with the City’s Financial Debt
Management and Accounting Policy.
City Finance – Treasury will consult
with Bond Counsel on Aviation’s
proposed plan for unused bond
proceeds
32
City of Charlotte, North Carolina
Turn Over Review
Debt Management - continued
Rating
Moderate
Observation
Recommendation
14. Financial, Debt Management and Accounting Policy for the Airport - continued
Management’s Response
Estimated
Completion
Date:
Aviation will develop an invoice
sampling and testing schedule by the
end of calendar year 2014.
Aviation will meet with the City’s
Central Finance – Treasury by the end
of calendar year 2014 to define scope
of unused bond expenditure plan.
Aviation will complete plan for use of
bond funds for Bond Counsel review
by end of calendar year 2014.
Responsible
Party:
Aviation
department in conjunction with the
City’s Central Finance - Treasury
33
Process Maps
City of Charlotte, North Carolina
Process Map
Billing and Revenues to include Rental Agreements and Contract Management
Revenue and Billing
Page 1 of 1
START
Prepares billing
advice
Generate invoice
in
PROPworks®
based on billing
advice
On periodic basis, compare
the active contracts to
invoicing parameters to
determine accuracy and
completeness of invoices and
follow-up on identified issues
Review nonrecurring invoices
to applicable
supporting
documentation
Review monthly/
annual/periodic
required reporting
Send invoices
(electronically via
e-mail or mailing
hardcopies)
Aviation
Finance
Department
Aviation A/R
Accountant
Contract
Administrator
City of Charlotte, North Carolina: Charlotte Douglas International Airport
Approve credit
memo in
END
PROPworks®
Resolve invoice
disputes
Yes
Issue credit memo
in
PROPworks®
Send credit memo
to customer
Receives payments and
reconciles information
to PROPworks®
Yes
Customer
No
Submit applicable
documentation for
billing advice
preparation – nonrecurring invoices
Receives invoice
Note: The Aviation Department has documented process maps/workflows of the following areas:
phase, invoice dispute, and new customer, contract or agreement.
Dispute
invoice?
Credit memo
needed?
Submit monthly/
annual/periodic
required reporting
No
PROPworks® overview, invoice payment by
Process
Step
Legend:
Automated
Control
Key
Control
34
City of Charlotte, North Carolina
Process Map
Billing and Revenues to include Rental Agreements and Contract Management - continued
Contract Administration
Page 1 of 1
Aviation
Finance
Department
City of Charlotte, North Carolina: Charlotte Douglas International Airport
Enter contract
information into
PROPworks®
PROPworks®
for changes or
amendments
(Note 1)
Aviation
Director
Process invoices
from billing
advices
Update
Approve contract
amendment
Approve contract
END
PROPworks®
System
Aviation
Revenue
Contracts
Administrator
Aviation
Department
START
Contract amended
Contract executed
File hardcopy of
contract and
attach electronic
copy in
PROPworks®
Electronic copy of
contract is uploaded
to PROPworks®
Monitor
compliance with
contract
requirements
(Note 4)
Review reports
received from
lessees for
reasonableness
Resolve reporting
and other contract
requirement issues
Review and act on
reminders from
Monitor changes in
circumstances
affecting contract
(Note 2)
PROPworks®
system (Note 3)
PROPworks® is utilized
PROPworks® system
for tracking contract
requirements and other
tickler items (Note 1)
sends prompts based on
information entered
Note 1: Contract information includes all contract terms and information requiring future update or monitoring. For example, expiration dates, square footage
reviews, index-based rate updates, should be entered into PROPworks® to enable system monitoring and automated reminder functionality.
Note 2: Changes in circumstances affecting the contract include early termination, square footage changes, etc.
Note 3: The Contract Administrator should involve other finance or business office employees as needed to ensure updates are made in accordance with the
contract terms. For example, if a reminder is received that a contract is set to expire, the Contract Administrator will ensure that appropriate parties are involved
with drafting and executing a renewal or new contract.
Note 4: The Contract Administrator should ensure that required reports are received and that the reports meet the information requirements stated in the contract.
Process
Step
Legend:
Automated
Control
Key
Control
35
City of Charlotte, North Carolina
Process Map
Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting
Pay Application Processing, Review and Approval – Internal Project Manager
Page 1 of 1
START
Generates Pay
Application
pencil copy
Receives pencil
copy of
invoice
City Finance
Department
Aviation
Finance
Department
Assistant
Contracts
Director for Coordinator for
Development Development
Project
Manager
Inspectors
Contractor
City of Charlotte, North Carolina: Charlotte Douglas International Airport
Concurs on
percentage of
completion to be
paid
Reviews invoice
for percent
completion.
Invoice Finalized
Inspectors
approve invoice,
documented by
sign-off*
Compares the finalized
invoice to pencil copy
and verify the amounts
match to the PM
Receives copy of
invoice
Receives
invoice
Attends weekly
construction
meetings
Project manager
approves invoice,
documented by signoff
Reviews invoice for
proper signatures,
certifications, correct
funding, reporting
requirements met
Receives
invoice
Receives
approved invoice
Reviews
retainage, amount
due, funds
availability
Submits original
invoice with support
to Aviation Finance
Department and
files copy of invoice
Reviews and
approves invoice
Inputs invoice
information into CIP
Database
Sends hard copy
of invoice to City
Finance via interoffice mail
Final invoice
review and
approval
Scans invoice into
ImageNow
system
Pays invoice
Process
Step
Legend:
Automated
Control
END
Key
Control
36
City of Charlotte, North Carolina
Process Map
Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting - continued
Pay Application Processing, Review and Approval – External Project Manager
Page 1 of 1
START
Generates Pay
Application
pencil copy
Receives
invoice
Concurs on
percentage of
completion to be
paid
Reviews invoice
for percent
completion.
Invoice Finalized
Project manager
approves invoice,
documented by
sign-off (Note 1)
Receives
invoice
Attends weekly
construction
meetings
City Finance
Department
Aviation
Finance
Department
Assistant
Contracts
Director for Coordinator for
Development Development
Project
Manager,
Architect
Contractor
City of Charlotte, North Carolina: Charlotte Douglas International Airport
Note 1: Architect does not sign off to note approval or certification for payment.
Reviews invoice for
proper signatures,
certifications, correct
funding, reporting
requirements met
Receives
invoice
Receives
approved invoice
Submits original
invoice with support
to Aviation Finance
Department and files
copy of invoice
Reviews and
approves invoice
Reviews
retainage, amount
due, funds
availability
Inputs invoice
information into
CIP Database
Sends hard copy
of invoice to City
Finance via interoffice mail
Scans invoice into
ImageNow system
Process
Step
Final invoice
review and
approval
END
Pays invoice
Legend:
Automated
Control
Key
Control
37
City of Charlotte, North Carolina
Process Map
Project Accounting and Capital Asset Accounting, to include Grant Budgeting & Accounting continued
Change Order Processing, Review and Approval
Page 1 of 1
City of Charlotte, North Carolina: Charlotte Douglas International Airport
Signs off on the
change order
Submits change
order request
Receives
proposal and
payment request
Initiates change order
form and consults
with Architect and/or
Engineer, as
applicable
Reviews change
order proposal
Verbally approves
change order
Logs change
order, verify
funding, complete
encumbrance
forms
Logs in final
change order
Receives final
change order for
filing
Reviews request
for encumbrances,
proper approvals
END
Change order
>=$100,000?
City Council
Fully executes
No
City Manager
Reviews change
order and
supporting
documentation
(Note 1)
Aviation
Director
Contracts
City Finance
Coordinator for
Department
Development
Aviation
Finance
Department
Assistant and
Deputy
Directors for
Development
Project
Manager
Contractor
START
Change order
>$50,000?
Yes
Reviews change
order and
supporting
documentation
with internal staff
Approves change
order
Reviews change
order and supporting
documentation and
approve change
order
Yes
Reviews change
order and supporting
documentation and
approve change
order
Note 1: Change order supporting documentation may include: entitlement determination, cost
support, and architect/engineer review and input.
No
Process
Step
Legend:
Automated
Control
Key
Control
38
City of Charlotte, North Carolina
Process Map
Contract Facility Charge
Contract Facility Charge
Page 1 of 1
City Finance
Department
Aviation
Rental Car
Finance
Concessionaires
Department
Rental Car
Customer
City of Charlotte, North Carolina: Charlotte Douglas International Airport
Start
Executed
agreement that
includes CFC
remittance
procedures
required reporting
Customer
executes rental car
agreement and
drives car off of lot
Customer returns
rental car
System calculates
applicable CFC based
on pickup and drop
off parameters
Submit monthly
activity reports to
Aviation Finance
Department
Remit preceding
month’s CFC
revenue to the
Trustee by 10th of
succeeding month
Review monthly
activity reports for
reasonableness
Follow-up with
concessionaire as
deemed necessary
Compare
concessionaire
monthly reporting
to Trustee
statement and
general ledger
Reconcile Trustee
bank statement to
the general ledger
and posts
accordingly
Submit
reconciliation to
Aviation Finance
Department
End
Remaining CFC
utilized for
approved
expenditures
Process
Step
Legend:
Automated
Control
Key
Control
39
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