Page images

ment was duly signed by them for and on behalf of said corporation by authority of its Board of Directors, and that said Agreement is within the scope of its corporate powers.

IN WITNESS WHEREOF I have hereunto set my hand and the seal of said corporation this 30th day of June 1951.

ROBERT G. THACH, Secretary.

Total charges and fees billed to Air Transport, Inc., under agreements with the United States of America for the operation of a taxicab service concession at the Washington National Airport, 1942-54

Fiscal year

1954 (10 months)

$ 73, 347. 70

110, 623. 11

105, 055.03











1943 1942

[blocks in formation]


Less adjustment for out-of-court settlement of disputed billings for
the years 1942 and 1945 through 1949, involving exceptions to con-
tractual provisions:

Total exceptions claimed by Airport Transport, Inc. $32, 920. 83
Agreed settlement.

Difference to be deducted___

665, 187.56

23, 045.66

9, 875. 17

Total revenue received from Airport Transport, Inc__

1 Minimum guaranty under contract.

655, 312. 39

The CHAIRMAN. I have a letter here from Senator Byrd, suggesting an amendment excluding a corporation having any jurisdiction over the Fairfax County Airport. You have no objection to that, of course, and have no intention of taking it into this corporation.

Mr. LEE. Mr. Chairman, this bill as it is now is limited to the Washington National Airport and does not include the Burke Airport. The CHAIRMAN. We will make it a part of the record and assure Senator Byrd that is the situation.

(The document referred to is as follows:)

May 21, 1954.


United States Senate.

MY DEAR JOHN: In connection with your bill, S. 3435, there has been quite a controversy, as you know, in regard to the Burke Airport. Up to this time, the Commerce Department has been opposed to this airport, which was authorized prior to the Eisenhower administration.

By reason of this, I would appreciate it very much if you would incorporate into your bill the enclosed amendment.

I have submitted your bill to the director of the division of aeronautics of the State Corporation Commission of Virginia and Virginia has no objection to the bill, but I hope the amendment enclosed will be approved by you.

With kindest regards, I am

Faithfully yours,


SEC. -. None of the provisions of this Act shall apply, nor are any intended to apply, to any real property acquired in Fairfax County, Virginia, by the United States Government, or by any agency thereof, pursuant to the authority granted in Public Law 762, Eighty-first Congress, second session, approved September 7, 1950.

The CHAIRMAN. That is all, Mr. Lee, unless you have something further.

Mr. Griffin, have you anything further?

Mr. GRIFFIN. No, sir, I have not.

The CHAIRMAN. Thank you very much.

Mr. Owen A. Kane for the General Accounting Office.


Mr. KANE. Good morning, Mr. Chairman.

The CHAIRMAN. It has been suggested we make your report a part of the record here.

Mr. KANE. Thank you, Mr. Chairman.

The CHAIRMAN. The report of Frank H. Weitzel, Acting Comptroller General of the United States.

Mr. KANE. Yes, sir.

The CHAIRMAN. And the report on audit of revenue from concession contracts of the Washington National Airport.

Mr. KANE. Yes, sir.

(The documents referred to are as follows:)

Washington 25, May 20, 1954.


Chairman, Committee on Interstate and Foreign Commerce,

United States Senate.

DEAR Mr. CHAIRMAN: This is in reference to your letter of May 12, 1954, requesting the views of the General Accounting Office concerning the incorporation of the Washington National Airport as proposed in the bill S. 3435, 83d Congress.

As a general proposition the corporate form of a Government instrumentality can be justified only by the most compelling reasons or overruling public necessity. Accordingly, the General Accounting Office has carefully considered the reasons advanced by the Department of Commerce in its letter of May 6, 1954, to the President of the Senate in proposing legislation to incorporate this activity, but I do not think that the reasons advanced warrant enactment of the legislation.

This Office is not aware of any reasons why the purposes sought to be accomplished could not be realized without the creation of a new corporation. It has taken Congress 9 years since the passage of the Government Corporation Control Act of 1945 to reduce the plethora of Government corporations to the present number.

One of the reasons stated in support of the proposed legislation is that the Hoover Commission found in its report dated April 1, 1949, on Federal business enterprises that the airport was a straight-line business enterprise for which incorporation was appropriate "so as to secure greater flexibility in management and simpler accounting, budgeting and auditing methods." Also, it was stated that the corporate form of agency in which "appropriated funds can be used until expended, and revenues used as received" would eliminate the difficulty of having to pay expenses from annual appropriations and depositing revenues into the Treasury as miscellaneous receipts.

Government accounting, budgeting, and auditing procedures have been modernized by the provisions of the Budget and Accounting Procedures Act of 1950, which eliminated the inflexibility of Government fiscal procedures that had been considered as a handicap in conducting Government business enterprises. Thus, Congerss has provided ample authority whereby business-type accounting, budgeting, and auditing methods can be applied to Government business-type operations. This need only be supplemented by an authorization for the Secretary of Commerce to conduct the airport operations through a revolving fund account, capitalized as proposed in the bill, in order to have the airport operated as a business entity. The fund could be charged with all ordinary business expenses, including depreciation and interest, and employees' retirement, disability, and compensation costs and could receive all revenues.

The revolving fund is utilized in connection with many noncorporate businesstype activities of the Government including the Bureau of Engraving and Printing (31 U. S. C. 181a), the Government Printing Office, the General Supply Fund of the General Services Administration, the National Bureau of Standards, and the Small Business Administration (67 Stat. 233).

As pointed out at page 9 of the enclosed copy of the report of the Senate Committee on Government Operations on Audit Reports of Government Corporations and Agencies (S. Rept. No. 861, 83d Cong.), "experience has shown that the most complicated Government programs can be carried out by the normal type agency of the Government." The committee also stated that under the Budget and Accounting Procedures Act of 1950 "business-type budgets and commercial-type audits can now be applied to the normal Government agency without having to resort to the budgeting and auditing provisions of the Government Corporation Control Act."

Another of the reasons assigned by the Department of Commerce for incorporation is the difficulty in attempting to operate a business enterprise under the restrictions applying to ordinary Government agencies in awarding contracts to the low bidder after advertising. The corporate form of agency is not essential for greater freedom in awarding contracts. If your committee determines that broader contracting authority is desirable for the airport operations, it would be a simple legislative matter to authorize airport contracts to be negotiated without advertising if administratively determined in the best interest of the Government.

Greater flexibility in management is another reason cited for incorporating the airport activities. The bill provides in section 6 (a) that management of the Corporation shall be vested in the Secretary of Commerce. This authority is now vested in the Secretary by virtue of the provisions of Reorganization Plan No. 5 of 1950, which became effective on May 24, 1950. He is, therefore, authorized to make such provision as he shall deem appropriate to manage the airport and has empowered the Under Secretary of Commerce for Transportation to supervise the operation of the airport through the Administrator of Civil Aeronautics who in turn has delegated operating responsibilities to the Director, Washington National Airport. Apparently, there would be no greater degree of "flexibility of management" referred to by the Department under the corporate form than under the existing law. Section 6 (b) provides for the establishment of an advisory board but this board, as its name implies, would exercise no real authority in the operations of the corporation.

Under the provisions of the bill, administrative determinations and expenditures of the corporation would not be subject to the normal audit by the General Accounting Office that presently applies to the airport expenditures and receipts. In this connection, there is enclosed a General Accounting Office report on audit of revenue from concession contracts of the Washington National Airport for the period July 1, 1948, to June 30, 1952, a copy of which was sent to your committee July 29, 1953. This report clearly indicates weak administration of the concession contracts at the airport and shows instances in which the management failed to ascertain whether the concessionaires were complying with contract terms. As a result of the audit examination, almost $35,000 in additional fees was collected and deposited into the United States Treasury. Administration of the concession contracts will not automatically be strengthened under the corporate form of organization. Actually, in the absence of a major revision of management policy, the broader corporate authority might definitely militate against the Government's interest with respect to these contracts because the General Accounting Office would not have authority to enforce collection of amounts found to be due the Government.

Finally, during the hearings before the subcommittee of the House Committee on Appropriations concerning 1955 funds for the operation of the Washington National Airport, the Secretary of Commerce acknowledged that the Congress would lose some control over the operations of the airport by incorporating it. It would appear highly desirable, therefore, that your committee not only carefully examine the concession arrangements at the airport but also the desirability of diminishing congressional control of this activity before taking final action on the proposed legislation.

If there is any further information you desire, please advise.
Sincerely yours,


Acting Comptroller General of the United States.


DIVISION OF AUDITS, Washington 25, July 29, 1953.


Comptroller General of the United States.

Dear Mr. WARREN: We have made an audit of the books of account and records of the Washington National Airport pertaining to fees received or receivable under contracts with concessionaires for the period from July 1, 1948, to June 30, 1952. This audit was made pursuant to authority contained in the Budget and Accounting Act, 1921 (31 U. S. C. 53), and the Accounting and Auditing Act of 1950 (31 U. S. C. 67).

The audit was extended to include an examination of the records of 15 of the airport's concessionaires to ascertain or verify the amount of fees payable to the Airport.


Washington National Airport is a Federal airport operated by the Administrator of the Civil Aeronautics Administration, Department of Commerce. The airport was put under construction in 1939 and was opened to traffic in June 1941. The functions of the airport are as follows:

1. Provides terminal airport facilities for the metropolitan area of the Nation's Capital.

2. Provides space and operating facilities on a commercial basis to air carriers and others who use the airport.

3. Provides, through concessionaires, various supply services to the public, air carriers, and other airport users.

4. Serves as a Federal Government model of airport administration and operation.

The act of June 29, 1940 (7 D. C. Code 1302, 1303), provides that:

"SEC. 1302. The Administrator [of Civil Aeronautics] shall have control over, and responsibility for, the care, operation, maintenance, and protection of the airport, together with the power to make and amend such rules and regulations as he may deem necessary to the proper exercise thereof.

"SEC. 1303. The Administrator is empowered to lease, upon such terms as he may deem proper, space or property within or upon the airport for purposes essential or appropriate to the operation of the airport."

The act of October 9, 1940 (54 Stat. 1039), provides that no agreement shall be entered into for the use of any hangar or space therein for a period exceeding 3 years nor shall any agreement be entered into for the operation of any concession except the restaurant for a period exceeding 5 years.

These provisions are carried out by the airport director in conformance with general policies and standards established by the Administrator.

There are approximately 100 contracts with concessionaires covering aviation activities such as sales and service to aircraft, rental of space in hangars and terminal, landing fees, ramp service, charter and sightseeing services, and ancillary activities such as advertising, barbershops, bookstores, flower shop, food sales, tours and observation facilities, ground school, ground transportation, jewelry stores, newstands, insurance service, photographic service, utilities

sales, sales and service to automotive vehicles, vending machines, and miscellaneous services.

Revenues from these contracts are deposited into the United States Treasury as miscellaneous receipts. Funds for maintenance and operation of the airport are appropriated annually by the Congress.

Revenues from concessions and rental of space in fiscal years 1949 through 1952 amounted to:





$977, 341 1,091, 029 1, 249, 007

1, 552, 961

All of these amounts had been collected by December 31, 1952, except $8,359, of which $6,279 has been determined by airport authorities to be uncollectible.


Our examination disclosed the following significant findings:

1. No systematic procedure was in effect to assure that the Government was receiving all the fees it should have received.

2. No reports were made to the management to disclose the status of concessionaires' accounts with the Airport.

3. The airport did not render bills promptly. In many cases billing was deferred while awaiting receipt of certifications from concessionaires as to the amount of gross receipts on which billing was to be made.

4. Billings were overlooked in some cases.

5. Little effort was made to collect delinquent accounts.

6. There were many instances of failure to ascertain whether concessionaires were complying with contract terms.

One concessionaire failed to pay the Government a fee on certain work on which we believed a fee should have been paid. When this was brought to the attention of airport officials, they obtained an opinion from the Comptroller General as to the proper interpretation of the contract provisions and billed the concessionaire for more than $18,000 additional fees, which was then collected by offset to amounts otherwise payable to the concessionaire. Another concessionaire failed to pay fees at the rates specified in the contract. More than $15,000 in additional fees was collected from this concessionaire. In other cases airport authorities failed to obtain certified statements, failed to obtain the required bond, and failed to require sealed cash registers and sealed coin boxes, as required by the contract terms. All these deficiencies would have been disclosed had there been a systematic review of the terms of the contracts and a proper procedure for ascertaining that concessionaires were complying with the contract terms.

As a result of our examination, almost $35,000 in additional fees has been collected and deposited into the United States Treasury, and about $12,000 in additional fees will be collected in each succeeding year.

These matters were brought to the attention of airport officials during our examination. Where possible, contracts were amended, delinquent accounts were collected or provision was made for their collection, fees were collected on amounts previously unreported, and other improvements were made. The airport officials cooperated wholeheartedly, and in most cases concessionaires agreed readily to pay the proper amounts.

On the other hand airport officials still have not adopted procedures for a proper review of concessionaires' records to ascertain that the Government is receiving all the fees it should receive, nor have they provided for accounting reports to management that will disclose the status of concessionaires' accounts with the airport.


1. We recommend that airport officials adopt a systematic procedure of contract review to ascertain that fees are received in accordance with contract terms.

1 The Administrator of Civil Aeronautics has informed us that these recommendations have been adopted.

« PreviousContinue »