1 Proposed for consolidation into policy and international affairs and funded for one quarter of fiscal year. 2 Proposed for consolidation into single salaries and expenses account. TRANSFER AUTHORITY The Committee has included bill language (section 334), requested by the Department, to authorize transfers of funds, not to exceed 5 percent, among these accounts subject to the approval of the House and Senate Committees on Appropriations. DEPARTMENTAL MANAGEMENT The Committee is disturbed by the managerial and financial weaknesses that continue to plague the Department. For the past several years, the Department's reports required under the Federal Managers Financial Integrity Act [FIA] have indicated that the accounting systems employed by the Office of the Secretary, the Coast Guard, and the Urban Mass Transportation Administration do not conform to the Comptroller General's minimum standards for Government accounting. These flaws have been recognized since 1978 in the case of the Coast Guard. The Department's proposed general solution for these deficiencies, the departmental accounting and financial information system [DAFIS], will not, however, be ready for implementation until late fiscal year 1988 at the earliest. The Committee, in its hearings this year, asked the Department's inspector general for his three top priority recommendations for improving the Department's management and strengthening its internal administrative controls. The reply follows: Improvement is needed in the control of automatic data processing in the Department. Major weaknesses have been surfaced in regard to the lack of written policies and procedures, failure to control sensitive applications, lack of adequate disaster planning, procurement of noncompatible equipment, poor control of the operating environment and unauthorized use, weak edit routines, and the failure to properly segregate duties. While corrective actions have been implemented in many instances, there are continuing problems reported each year in the ADP area. Serious accounting system weaknesses are present in the Department, especially in the Coast Guard, Office of the Secretary, and UMTA. Critical problems have surfaced in regard to duplicate payment and overpayment of invoices, failure to comply with IRS information return filing requirements, noncompliance with the Prompt Payment Act, failure to record payables and receivables, inadequate prepayment review of travel claims, failure to process remittances promptly, lack of control over cash receipts, untimely billings and collections and failure to reconcile accounts. While considerable attention is being given to developing adequate departmentwide accounting systems, it will be several years before the problems will be corrected. A number of significant internal control weaknesses have been reported in the procurement areas such as the failure to properly administer procurements in order to prevent paying for undelivered goods and services, inadequate procurement planning, failure to close out contracts in a timely manner, inclusion of unnecessary unique requirements which lessens competition, inefficient processing and control of workload, and inadequate training and policy direction for procurement personnel. Instances of problems in grant management and administration have been repeatedly reported. Problems have surfaced in regard to inconsistent grantee control of consultant contracts, inadequate monitoring of grants especially in UMTA, overexpenditure of grant funds, improper usage of grant funds by grantees, an inadequate grants management information system in UMTA, and the inability to control the DBE/WBE programs. Inadequate control of personal property continues to surface as a problem in the Department. Weaknesses have been reported in identifying and recording personal property; assigning responsibility over property; reconciling subsidiary records with control accounts; and taking physical inventories and investigating differences. There have also been problems in using property efficiently, disposing of unneeded property, and providing adequate written procedures. The Committee finds it hard to understand why it apparently takes so long to implement the managerial and financial reform needed to correct these recurrent problems-many of which expose the Government to fraud, waste, and the misuse of public funds and property. This is especially puzzling in light of the fact that one-third of the Senior Executive Service [SES] executives in OST received bonuses ranging from $4,750 to $13,740 for outstanding performance in fiscal 1986. The Committee expects these deficiencies to be corrected as soon as possible and in no case later than September 30, 1988. The Department should submit a plan for implementing the necessary reforms, including appropriate timetables and benchmarks, to the House and Senate Committees on Appropriations by October 31, 1987. STAFFING CHANGES Assistant Secretary for Policy and International Affairs The Committee has concurred in the reduction of two positions in the immediate Office of the Assistant Secretary on account of budgetary constraints. Assistant Secretary for Government Affairs The House terminates the Technology and Planning Assistance Program. The Committee agrees that this funding does not belong in the Office of Government Affairs. Technology dissemination should not be vested in an office whose mission is purely political. At the same time, however, the Committee recognizes the value of having a unit specialized in promoting effective access to the latest transportation-related technology. Accordingly, the Committee recommends transferring the positions and funds for technology and planning assistance from the OST to the Research and Special Programs Administration [RSPA] which, among other things, houses the Department's science advisor and is responsible for multimodal research and development. Assistant Secretary for Administration The Committee concurs with the House action in reducing the complement for this office from 178 to 175 positions for reasons of economy and efficiency. Office of Commercial Space Transportation The Committee recommends restoration of the two positions deleted by the House. While the Committee agrees with the House that an objective evaluation of OCST organization and grade structure should be conducted, elimination of two positions seems premature and could well impede the development of the in-house capability for safety analysis and regulation provided for under transportation planning, research, and development. Office of Essential Air Service The Committee has reduced the House allowance by $117,000 and two positions on the basis of more recent information concerning program requirements. RESERVATION OF FUNDS The Committee has deleted House bill language reserving 5 percent of the funds available for OST salaries and expenses until the Department completes rulemakings requiring installation and carriage of: (1) flight data recorders [FDR] and cockpit voice recorders [CVR] on certain categories of commuter aircraft and (2) mode C (altitude reporting) transponders on aircraft operating in radar service areas and above a minimum altitude determined by FAA. The Committee shares the frustration reflected in this provision and the House report with respect to the scope and pace of FAA's progress on these matters. The transponder rules announced by FAA thus far, for example, would apply to only 32 of the 186 terminal areas with radar service. Similarly, the FDR/CVR rule changes promulgated March 25, 1987, are, while an improvement, still considerably short of the aircraft coverage and capability enhancements recommended by the National Transportation Safety Board. The Committee, therefore, reaffirms its direction, as stated in the Senate Report 100-48, that FAA expedite its current rulemaking to address the NTSB recommendations on CVR's/FDR's. The Committee expects that the resulting rule changes regarding commuter aircraft will be in place no later than December 31, 1987. The Committee also expects FAA to incorporate consideration of NTSB's recommendations regarding other types of aircraft within the current rulemaking. In addition, the Committee has included a general provision inserted by the House in title III requiring adoption of more comprehensive transponder regulations. SLOT ALLOCATION AT WASHINGTON NATIONAL AND LA GUARDIA The Committee is concerned with respect to the situation for obtaining slots at Washington National and La Guardia Airports. In this regard it should be noted that Judge Yoder, in the USAIR-Piedmont acquisition case, has determined that slots are unavailable to new entrants at these airports. The Committee, therefore, urges the DOT to give immediate attention to the slot situation at these two airports. ALASKA MAIL RATE CASE The Committee is concerned that a mail rate case has not been conducted for the carriage of mail in Alaska under the CAB Sunset Act since 1982. Since that time, the two carriers transporting almost two thirds of the mail in the State have entered the mail carriage market, and the prior dominant mail carrier has ceased operations. In addition, the distribution patterns of mail throughout Alaska have changed dramatically. The Department of Transportation is directed to institute a new mail rate case to establish a fair and reasonable rate for the carriage of mail within the State of Alaska. Until such time as a new mail rate case is completed and implemented, the January 1, 1987, rate should be effective. CODE SHARING RIGHTS FOR FOREIGN CARRIERS Airlines use two letter codes (designator codes) in the Official Airlines Guide, in computer reservations systems, and on tickets to identify the carrier providing the service. For the most part, each carrier has its own code. However, carriers sometimes share their designator codes. Often code sharing is an aspect of agreements between airlines to integrate schedules or operations or both, and the agreements permit some or all of the flights of one of the partners to be identified with the two-letter code of the other airline with whom it has a special relationship. The practice has the effect of elevating connecting service to online status (and frequently a preferential listing vis-a-vis interline connections) in most U.S. airline computer reservations systems. The Committee is concerned about the potential impact of any unilateral concession of code sharing rights to foreign carriers on the economic health of the U.S. aviation industry. Clearly, code sharing agreements should not be permitted if the results would be to undermine well established restrictions on cabotage or to give foreign carriers an unfair trade advantage and transfer American jobs to our competitors abroad. Thus, the Committee agrees with the House in stressing the importance to be attached to our national economic interests in the formation and execution of international aviation policy. Under current policy, the Department may authorize code-sharing between domestic and foreign carriers where the latter have authority in the existing bilateral agreement to serve all the U.S. points in question (that is, gateway cities). Likewise, U.S. carriers with authority to serve foreign points are permitted under U.S. law to code-share with a foreign carrier serving those points. Permitting foreign carriers to share codes with bonafide U.S. airlines (that is, those which are entirely independent financially and organizationally of the foreign carrier in question) gives foreign carriers market access to certain U.S. cities but in no way authorizes them to engage in the carriage of domestic traffic between U.S. cities (cabotage) and, therefore, can entail no displacement of U.S. airline employees. The danger of a negative or prejudicial impact on the U.S. aviation industry thus arises only where a foreign carrier is granted new, expanded code-sharing rights without reciprocal improvements in economic benefits and market access for U.S. carriers. Although the Committee agrees with the House that such unbalanced agreements should not be permitted, it is questionable whether a |