Court filing
Audit of Direct Loan Program Recipient — Mesa Airlines, Inc. (SIGPR-A-22-006)
Record facts
| Court | Special Inspector General for Pandemic Recovery |
|---|---|
| Filed | 2023-09-20 |
Summary
An audit report of the Office of the Special Inspector General for Pandemic Recovery, Report Number SIGPR-A-22-006, dated September 20, 2023, on whether Mesa Airlines, Inc. followed the terms of its CARES Act direct loan agreement with the Department of the Treasury. It states that Treasury agreed in October 2020 to lend $195 million under section 4003(b)(1), drawn as $43 million at closing and $152 million on November 13, 2020, maturing October 30, 2025. Finding 1 reports that about $944,400 of loan proceeds was allocated to pay principal on other indebtedness, which the report says Section 6.16 of the loan agreement prohibits. Finding 2 reports that the Collateral Coverage Ratio fell from the required 1.60 to 1.00 to 1.55 to 1.00 and that Treasury granted waivers. The report makes three recommendations to Treasury officials and appends comments from Mesa and Treasury.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
SIGPR-A-22-006
Audit of Direct Loan Program Recipient –
Mesa Airlines, Inc.
Report Number SIGPR-A-22-006
September 20, 2023
Office of the Special Inspector General for
Pandemic Recovery
Office of Audits
SIGPR-A-22-006
i
Executive Summary
Audit of Direct Loan Program Recipient – Mesa Airlines, Inc.
Report Number SIGPR-A-22-006
September 20, 2023
Why We Performed This Audit
We performed this audit as part of our ongoing audit work relating to Section 4003,
Division A, Title IV, Subtitle A of the Coronavirus Aid, Relief, and Economic Security Act
of 2020 (CARES Act). Mesa Airlines, Inc. (Mesa) received a loan under the CARES Act
section 4003(b)(1) and entered into a loan agreement with the Department of the
Treasury (Treasury). The audit intends to determine if Mesa is following the terms and
conditions in its loan agreement with Treasury.
What We Found
We found instances where Mesa used proceeds from the loan to make payments on other
existing loans, which is in violation of the terms of the loan agreement. We also found that
Mesa fell below the Collateral Coverage Ratio requirement of 1.6 to 1. Rather than
requiring Mesa to make loan payments or pledge additional collateral to get in compliance
as the agreement dictates, Treasury granted Mesa a waiver to this requirement and
reduced the ratio to 1.55 to 1. Finally, although the loan agreement requires Mesa to use
all proceeds from the sale of collateral to repay the loan, Treasury entered into an
agreement to allow Mesa to use only a portion of its proceeds from the sale of collateral
to be applied towards the loan repayment.
What We Recommended
We recommend that Treasury officials:
1. Determine what if any corrective action(s) should be taken to address Mesa’s
misallocation of $944,400 in loan proceeds; and implement these action(s) as
necessary.
2. Closely monitor Mesa’s collateral and develop a plan on how to proceed with
managing the loan if Mesa falls short of the terms established in the loan and
waiver agreements.
3. Ensure that borrower disposition of collateral is handled in accordance with the
terms of the loan agreement for Mesa and all other outstanding direct loans.
SIGPR-A-22-006
ii
Table of Contents
Introduction .............................................................................................................. 1
Results
Finding 1 – Mesa Inappropriately Used $944,400 of Loan Proceeds to Pay Principal on
Other Indebtedness. ................................................................................ 3
Finding 2 – Mesa Has Not Maintained Collateral in Accordance with the Loan
Agreement. .............................................................................................. 4
Conclusion ................................................................................................................ 8
Recommendations ..................................................................................................... 8
Agency Comments ..................................................................................................... 8
Appendixes
Appendix A – Scope and Methodology .............................................................. A-1
Appendix B – Mesa Airlines, Inc. Comments ..................................................... B-1
Appendix C – Treasury Comments ..................................................................... C-1
Appendix D – Report Distribution ....................................................................... D-1
SIGPR-A-22-006
1
Introduction
The Special Inspector General for Pandemic Recovery (SIGPR) was established by
Section 4018 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Under
the CARES Act, SIGPR has the duty to conduct, supervise, and coordinate audits and
investigations of the making, purchase, management, and sale of loans, loan guarantees,
and other investments by the Secretary of the Treasury under any program established
by the Secretary under the Coronavirus Economic Stabilization Act of 2020 (CESA), as
well as the management by the Secretary of any program established under CESA.
SIGPR also has the duties, responsibilities, powers, and authorities granted inspectors
general under the Inspector General Act of 1978. We performed an audit of Mesa Airlines,
Inc. (Mesa) to determine if Mesa complied with the provisions in the CARES Act, and if it
followed the terms and conditions of their loan agreement.
The role and mission of SIGPR is to safeguard the people’s tax dollars appropriated by
Congress through the CARES Act. SIGPR strives to ensure that the American taxpayer
gets the best return on investment by efficiently rooting out fraud, waste, and abuse. In
carrying out its mission, SIGPR’s goal is to treat everyone with respect, to operate with
the utmost integrity, and to be fair, objective, and independent.
Purpose
The SIGPR Office of Audits has the mission to conduct audits of loans, loan guarantees,
and other investments made by the U.S. Department of the Treasury (Treasury) under
any program established by the Treasury under Division A of the CARES Act. Section
4003(b)(1)-(3) of the CARES Act appropriated up to $25 billion to help stabilize the airline
industry. In October 2020, Treasury agreed to make a loan totaling $195 million to Mesa.
The purpose of this audit is to determine if Mesa is following the terms and conditions in
its loan agreement with Treasury.
Objective
The objective of SIGPR’s Audit of Direct Loan Program Recipient – Mesa Airlines, Inc.
is to determine if Mesa is following the terms and conditions of its loan agreement with
Treasury.
See Appendix A – Scope and Methodology for additional details.
Background
Section 4003 of the CARES Act authorizes Treasury to make loans, loan guarantees, and
other investments to provide liquidity to eligible businesses related to losses incurred
because of the coronavirus pandemic. Under this program, Treasury provided
approximately $2.7 billion in loans to 35 eligible businesses, including passenger air
carriers, repair station operators, ticket agents, cargo air carriers, and businesses critical
to maintaining national security. As of April 2023, of the 35 loans that Treasury executed,
21 businesses owe a combined $974 million. Fourteen borrowers have fully repaid their
SIGPR-A-22-006
2
loans. In total, borrowers have paid over $1.7 billion in principal prepayments, and more
than $107 million in cash interest payments.
On October 30, 2020, Treasury made a loan to Mesa pursuant to section 4003(b)(1) of
the CARES Act. Mesa elected to draw $43 million at close and $152 million on November
13, 2020, for a total value of $195 million. The loan proceeds were to be used to provide
liquidity to continue the Company’s operations. The loan is secured by aircraft, engines,
accounts receivable, tooling inventory, simulators, and ground service equipment. The
loan has an interest rate equal to LIBOR (London Interbank Offered Rate) plus 3.5% and
matures on October 30, 2025. The loan agreement includes covenants by Mesa to
comply with certain restrictions on employee compensation, stock repurchases,
dividends, and reductions in employment levels, as required by the CARES Act. The loan
agreement includes other provisions such as restrictions on the use of the loan proceeds,
the sale of collateral, and requirements on maintaining a minimum value of collateral.
Mesa is a regional air carrier providing scheduled, commercial passenger service
throughout the U.S., as well as to Canada, Mexico, Cuba, and The Bahamas. Mesa is
headquartered in Phoenix, Arizona, and operates flights on behalf of United Airlines and
DHL Express, flying planes branded as United Express, and DHL.
Status of Mesa’s Treasury Loan as of 9/1/2023
Loan Amount
Date of
Loan
Agreement
Maturity
Date
Total
Outstanding
Loan Amount
Total Prepaid
Principal
Cash
Interest
Receipts
$195,000,000
10/30/2020
10/30/2025
$144,400,117
$60,546,900
$15,649,367
SIGPR-A-22-006
3
Results
We found instances where Mesa is not in compliance with the terms of its loan agreement
with Treasury. Mesa used a portion of its direct loan proceeds to pay on other existing
loans, which is in violation of the terms of the loan agreement. Furthermore, Mesa has
not maintained collateral in accordance with the terms of the loan agreement. For
example, Mesa has not maintained the minimum Collateral Coverage Ratio to comply
with the loan terms and has sold collateral without using the full proceeds of the sale to
pay down the loan as directed by the loan agreement. Treasury is aware of the non-
compliance related to collateral and has granted waivers to Mesa to lower the Collateral
Coverage Ratio and allow for the sale of collateral.
Finding 1 – Mesa Misallocated $944,400 of Loan Proceeds to Pay Principal on
Other Indebtedness.
Mesa allocated approximately $944,400 of its loan proceeds to make payments on other
loans, which is not permitted under the terms of the loan agreement. Mesa did not receive
any guidance on how to account for the spending of the loan proceeds from Treasury,
and Treasury was not able to detect the improper payments through its monitoring
processes. By not taking measures to ensure that borrowers use loan proceeds
appropriately, Treasury cannot ensure that its loans are meeting the intent of the CARES
Act.
Section 6.16 of the loan agreement states that loan proceeds should not be used “for any
purpose other than for general corporate purposes and operating expenses.” Section 6.16
makes a specific prohibition on the use of proceeds to pay down other loans, stating that
proceeds of the loan, “shall not be used for any non-operating expenses (including capital
expenses, delinquent taxes and payments of principal on other Indebtedness).”
Mesa began using the proceeds of its CARES Act loan in November 2020 and had used
all the proceeds by April 2021. According to Mesa officials, they did not have any formal
guidance on how to account for the spending of the CARES Act money. Therefore,
accounting for the use of loan proceeds involved a “learning curve” where Mesa had to
develop its own system to ensure compliance with the loan agreement. As part of its
system, Mesa developed a “Draw Request Tracker” spreadsheet to monitor its use of the
loan proceeds. The spreadsheet tracks the amount of loan proceeds paid out through
checks, wire payments, and payroll, and was used to flag payments that were not eligible
to be paid with the Treasury loan proceeds.
Mesa had all of its loan proceeds deposited into a separate bank account they referred
to as the “Treasury Account.” Once Mesa identified payments to make with the loan
proceeds, Mesa transferred the payment amounts from the Treasury Account into its
“Concentration Account”, which was an operating account Mesa used to send payments
to vendors. Although CARES Act funds and Mesa’s operating funds became mixed once
Mesa made these transfers, Mesa had the Draw Request Tracker spreadsheet to track
items allocated for payment with the CARES Act funds.
SIGPR-A-22-006
4
Although we found that Mesa flagged most payments that were not eligible to be made
with CARES Act funds, our review of the Draw Request Tracker and Mesa’s bank
statements identified four ineligible payments that were not flagged. Mesa transferred
money for these payments in November 2020 shortly after receiving the loan proceeds,
during what Mesa officials described as their “learning curve”. It appears Mesa transferred
money for these loan principal payments unintentionally, before it had fully developed its
controls to prevent such payments. In total, Mesa allocated $944,400 in CARES Act
funding to pay down other existing loans, which violates the terms of the loan agreement.
Treasury’s Oversight – Use of Loan Proceeds
To help ensure borrower compliance with the terms of its loan agreements, Treasury has
a quarterly “Review Card” process. As part of this process, borrowers must enter
responses to Treasury’s monitoring questions through a Salesforce portal. Treasury
developed the Review Card questions to monitor compliance in a variety of areas,
including the use of the loan proceeds. However, the Review Card process relies primarily
on borrower certifications. If a borrower’s self-reporting is incomplete or indicates non-
compliance, Treasury may initiate a more detailed review.
As part of the quarterly Review Card process, Treasury requests information from the
borrower on its use of the loan proceeds. However, unless the borrower self-reports that
it used direct loan proceeds for expenses other than operating expenses or general
corporate purposes, the borrower will get a pass for the Direct Loan Spending portion of
the Review Card. For example, in Quarter 4 of 2020, as detailed above, Mesa used
$944,400 in loan proceeds to pay down existing loans. However, because Mesa did not
indicate that it used the loan proceeds inappropriately, Mesa received a pass in the Direct
Loan Spending Review Card section for that quarterly period.
Because Mesa received a pass in the Loan Spending Review Card section in Quarter 4,
2020, it is assumed that Treasury is unaware of Mesa’s $944,400 in improper allocation
of loan proceeds. Treasury should determine whether corrective action is appropriate in
this instance.
Treasury provided loans to Mesa and other airlines as part of the CARES Act to provide
liquidity related to losses incurred as a result of the coronavirus pandemic. By not
ensuring that loan proceeds are used in accordance with the loan agreements, Treasury
does not have assurance that its loans are meeting this intent. Treasury should make
efforts to ensure that any future programs include enhanced monitoring and guidance to
borrowers to ensure that loan proceeds are expended appropriately and consider if
corrective action is appropriate to address Mesa’s loan proceeds allocation error.
Finding 2 – Mesa Has Not Maintained Collateral in Accordance with the Terms of
the Loan Agreement
Mesa’s ratio of pledged collateral to loan value fell below the level mandated by the loan
agreement. Once Mesa fell out of compliance with the ratio requirement, Treasury
granted waivers to Mesa in an attempt to keep them in compliance. In addition, Mesa
SIGPR-A-22-006
5
sold pledged collateral and did not use 100 percent of the net proceeds from the sale to
pay down the loan as required by the original loan agreement. Treasury is aware of these
issues and has granted waivers to allow for Mesa to remain in non-compliance with the
loan terms. Treasury must be diligent in monitoring Mesa’s collateral going forward to
ensure its financial interests are protected.
Mesa entered into a Pledge and Security Agreement with Treasury and the Bank of New
York Mellon which details the collateral Mesa pledged for the loan. For the first $43 million
draw of the loan at loan origination, Mesa pledged five aircraft (which included two
engines each), nine additional engines, flight simulators, various ground support
equipment, qualified receivables from United and American Airlines, and a large inventory
of tooling equipment. At the second draw of the loan ($152 million), Mesa pledged an
additional 44 aircraft with accompanying engines (88 engines total). Mesa’s collateral was
valued at over $388 million.
The original loan agreement between Mesa and Treasury has several provisions related
to loan collateral. Mesa must maintain a Collateral Coverage Ratio (CCR) of at least 1.60
to 1.00, and collateral must be appraised twice per year. There are also restrictions on
the disposition (sale) of its collateral. For example, if Mesa sold any collateral that was
pledged to its loan with Treasury, Mesa is required to allocate 100 percent of the net
proceeds of that sale toward paying back its loan. Over the past year, Mesa has fallen
out of compliance with each of these terms of the loan agreement.
Collateral Coverage Ratio
Mesa has not maintained a CCR of 1.60 to 1.00 as prescribed in the loan agreement. The
loan agreement defines the CCR as “the ratio of the Appraised Value of the Eligible
Collateral as of the date of the Appraisal or Valuation Certificate most recently delivered
with respect to such Eligible Collateral…to the aggregate principal amount of all Loans
and Commitments outstanding as of such date.” During the month ending March 31,
2022, Mesa’s CCR fell to 1.55 to 1.00, which is below the minimum contractual ratio.
In response to Mesa falling below the required CCR, on April 15, 2022, Mesa, Treasury,
and the Bank of New York Mellon entered into a Waiver Agreement (effective April 1,
2022) which modified the CCR covenant down to 1.50 to 1.00 through September 30,
2022. The agreement contained many conditions, including a requirement that Mesa
produce a plan and timeline detailing the steps that Mesa would take to get back into
compliance with the 1.60 to 1.00 standard by September 30, 2022.
However, Mesa was not able to get back into compliance with the CCR requirement by
September 30, 2022. Subsequently, on November 7, 2022, Mesa sent a letter to Treasury
detailing a plan to sell some of its pledged collateral to pay down the loan balance. Mesa
planned to sell eight aircraft with associated engines by December 2022 and sell an
additional 11 aircraft with associated engines by April 2023. Mesa intended to use the net
proceeds from these two sales to pay down its loan by approximately $50 million. Mesa
offered that it could maintain a CCR of 1.50 to 1.00 under this plan.
SIGPR-A-22-006
6
In response to Mesa’s November 7, 2022 letter, Treasury entered into another Waiver
Agreement with Mesa on December 22, 2022 (effective October 1, 2022). Under this
Waiver Agreement, the CCR covenant was reduced to 1.55 to 1.00 until the loan’s
maturity date. In addition, the Waiver Agreement dictates that Mesa must allocate at least
$32 million of the net proceeds from the sale of collateral proposed in its November 7,
2022 letter to prepay the principal balance of the loan. Furthermore, in the event Mesa
sells any other collateral at any time, Mesa must use the net proceeds of those sales to
pay down the loan to maintain a CCR of at least 1.55 to 1.00.
Mesa’s Sale of Collateral
On January 11, 2023, Mesa sold eight aircraft and associated engines that were pledged
as collateral to its Treasury loan. This sale yielded approximately $40 million in net
proceeds for Mesa, $32 million of which was applied to the loan. On March 17, 2023,
Mesa sold four additional collateral aircraft for $14.2 million, with all proceeds of the sale
applied to the loan balance. Finally, on April 13, 2023, Mesa sold six engines previously
pledged as collateral for $11.2 million, with all proceeds applied to the loan.
Section 2.06(b)(i) of the original loan agreement, dated October 30, 2022, dictates that in
the event the borrower sells collateral, the borrower must prepay its loan in the amount
equal to 100 percent of net proceeds from the sale. From January through April 2023,
Mesa sold airframes and engines pledged as collateral to the loan and received a total of
$65.4 million in proceeds. However, Mesa did not apply 100 percent of these proceeds
toward the loan, paying a total of $57.4 million (88 percent) from the proceeds of the
collateral sale.
Treasury is aware that Mesa did not use the full proceeds from the collateral sale to pay
down the loan balance. The Modification and Waiver Agreement between Treasury and
Mesa dated December 22, 2022 amends the original loan agreement and allows for Mesa
to sell collateral and use the proceeds of the sale to get the CCR at a level of at least 1.55
to 1.00. Treasury documented its decision to allow for the sale of the collateral and to
lower the CCR to 1.55 to 1.00 in a December 22, 2022 Action Memorandum. Treasury’s
financial advisor concluded that allowing for the sale of collateral and lowering the CCR
increases Treasury’s recovery rate on the loan by facilitating multiple prepayments,
reducing the amount of collateral Treasury would have to liquidate in bankruptcy, and
maintaining the value of collateral through ongoing use. Treasury believes the plan is
consistent with the CARES Act’s primary objective of providing liquidity to eligible
businesses related to losses as a result of the coronavirus, and the allowances provided
by Section 4027(c) of the Act which allows for modifying, restructuring, or otherwise
amending 4003 loans, provided no extension of duration or loan forgiveness.
While Treasury conducted its due diligence in considering Mesa’s waiver requests for the
CCR and sale of collateral, it is important that Treasury continue to closely monitor Mesa’s
collateral to protect its interests. Subsequent to the waiver’s approval and the three
separate sales of collateral, Mesa submitted a CCR computation in April 2023 showing a
SIGPR-A-22-006
7
ratio of 1.51 to 1.00, which is below the lowered CCR standard in the waiver agreement.1
Treasury must consider how to move forward managing its loan to Mesa if Mesa
continues to fall short of meeting the terms of the loan agreement.
1 Later in April 2023, Mesa made a $3.2 million payment on the loan to get the ratio back into compliance
with the CCR requirement of 1.55 to 1.00 as of April 30, 2023.
SIGPR-A-22-006
8
Conclusion
Mesa is not in compliance with all the terms and conditions of the loan agreement. Mesa
used $944,400 in loan proceeds to make payments on other existing loans, which is in
violation of the loan agreement. In addition, Mesa has not been able to remain in
compliance with the loan agreement’s Collateral Coverage Ratio requirement. Finally,
Treasury allowed Mesa to dispose of collateral without collecting the full proceeds of the
sale as directed by the loan agreement. Treasury needs to ensure loan proceeds are
used as intended to help establish that its loans are meeting the intent of the CARES Act.
Furthermore, it is important that Treasury monitors Mesa’s collateral and should enforce
the existing terms of its loan agreements to protect its investments in its CARES Act loans.
Recommendations
We recommend that Treasury officials:
1. Determine what if any corrective action(s) should be taken to address Mesa’s
misallocation of $944,400 in loan proceeds; and implement these action(s) as
necessary.
2. Closely monitor Mesa’s collateral and develop a plan on how to proceed with
managing the loan if Mesa falls short of terms established in the loan agreement
and waiver agreements.
3. Ensure that borrower disposition of collateral is handled in accordance with the
terms of the loan agreement for the loan to Mesa and all other outstanding direct
loans.
Mesa Airlines, Inc. Comments
In its response to the draft report (Appendix B), Mesa expressed disagreement with
Finding 1 of the report. Mesa brought forth four points in its rebuttal to Finding 1 of the
report:
1) It had sufficient funding to cover the $944,400 payment without using CARES Act
funds;
2) The Draw Request Tracker provided only a sampling of upcoming approximate
payables, and did not have a connection to actual payments or payments listed in
the tracker;
3) It had other eligible payments that could have been made with the loan proceeds,
but were not; and
4) It has been an exemplary borrower, complying with the CARES Act and loan
agreement.
SIGPR Response
While we agree that some aspects of this argument have merit, we stand by the facts
communicated in Finding 1. Mesa allocated $944,400 of CARES Act funds to make a
principal payment on another loan, which was not an allowable use of loan proceeds
according to its loan agreement with Treasury.
SIGPR-A-22-006
9
In its first point of the response to the draft report, Mesa argues that it had “more than
sufficient funds in its bank accounts to pay for all of the payables due during this time
frame without using any funds from the Treasury”. We agree with this statement. The
balance of Mesa’s Concentration Account on October 31, 2020 was approximately $23.7
million. This was prior to any deposits or transfers from its CARES Act loan.
Although Mesa had enough funding in its operating account to cover the $944,400 in loan
payments mentioned in Finding 1 of this report, Mesa’s Draw Request Tracker and bank
statements show that Mesa allocated loan proceeds from its Treasury Account to make
the loan payments. During the month of November 2020, Mesa made four separate
transfers from its Treasury Account, which contained the CARES Act loan proceeds, into
its operating account (Concentration Account). Mesa’s Draw Request Tracker listed the
payments to be made and the amounts of the payments. Included in the $8.5 million
transferred from the Treasury Account to the Concentration Account on November 24,
2020 was money allocated to four loan payments. The principal amount of these four loan
payments totaled $944,400.
In the second point of its response to the draft report, Mesa argued that its Draw Request
Tracker provided only a sampling of approximate payables, and that there was no
connection between the amounts drawn from the loan proceeds and payments listed in
the tracker. We do not agree with this statement. Our review found that amounts allocated
for payments in the Draw Request Tracker match amounts transferred from the Treasury
Account to the Concentration Account down to the penny. In other words, items identified
for payment in the Draw Request Tracker did not represent approximate payables, but in
fact represented actual amounts to be paid through loan proceeds transferred into the
Concentration Account. Therefore, although loan proceeds from the Treasury Account
and Mesa’s Concentration Account funds were mixed once the Treasury funds were
transferred, the Draw Request Tracker effectively identified payments made with the loan
proceeds.
Furthermore, our review of the Draw Request Tracker showed that the tracker was used
to help identify payments that were not eligible to be paid with the loan proceeds. We
observed several instances where this process was effective in flagging ineligible uses of
loan proceeds, similar to the $944,400 payment identified in this report. When Mesa
flagged ineligible uses through the Draw Request Tracker, Mesa removed the
corresponding dollar amounts from the Treasury Account transfer request. Therefore, it
is apparent that Mesa did regard the Draw Request Tracker as a method of identifying
actual payments to be made with loan proceeds, rather than a sampling of approximate
payables.
In the third point of its response to the draft report, Mesa argued that it had other eligible
payments that could have been made with loan proceeds but were not. We agree with
the statement. There were in fact other payments Mesa could have made with the loan
proceeds that would have been eligible. Our review indicates that the $944,400 loan
payment was made by Mesa in error, and that Mesa did not knowingly use the loan
proceeds inappropriately. Had Mesa caught the error, it is likely those funds would have
been used for other eligible payments.
SIGPR-A-22-006
10
In its last point of its response to the draft report, Mesa mentions that it has been an
exemplary borrower, complying with the CARES Act and loan agreement. Other than a
misallocation of $944,400 in loan proceeds for an ineligible payment, we have seen no
reason to contradict this statement. Again, our review indicates that Mesa’s ineligible use
of loan proceeds was unintentional. We agree that Mesa had other eligible payments that
could have been made with the loan proceeds had they identified the $944,400 payment
as ineligible. Mesa officials were very cooperative with the audit and provided all
requested records and information in a timely manner.
Mesa’s response to the draft report is provided in its entirety in Appendix B.
Treasury’s Comments
In its response to the draft report, Treasury did not express any disagreement with the
report’s findings or recommendations. Treasury’s response to the draft report is provided
in its entirety in Appendix C.
Audit Team
This audit was managed and conducted by the individuals listed below:
Kevin Gallagher
Audit Manager
Victor Martinez
Auditor-In-Charge
SIGPR-A-22-006
A-1
Appendix A – Scope and Methodology
Scope and Methodology
Our objective was to determine if Mesa is in compliance with the terms of its loan
agreement with Treasury.
To accomplish our objective, we:
• Interviewed Treasury’s program officials charged to handle Mesa’s loan;
• Reviewed the CARES Act Section 4003(b) requirements;
• Reviewed the Loan and Guarantee Agreement and Pledge and Security
Agreement between Mesa, Treasury, and the Bank of New York Mellon;
• Reviewed Treasury’s process for monitoring the loan through Salesforce Review
Cards; and
• Conducted a site visit to Mesa to interview Mesa officials and review financial
information related to the loan.
We conducted this performance audit between July 2022 and April 2023 in accordance
with generally accepted government auditing standards. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Internal Control
We assessed internal control and compliance relating to the context of our audit against
Standards for Internal Control in the Federal Government (GAO-14-704G) and with laws
and regulations necessary to satisfy the audit objective. The methodology above
describes the scope of our assessment, and the report findings include any internal
control deficiencies we identified. Our assessment is not intended to provide assurance
on Treasury’s internal control structure as a whole. Treasury management is responsible
for establishing and maintaining an effective system of internal control.
B-1
Appendix B – Mesa Airlines, Inc. Comments
B-2
B-3
B-4
C-1
Appendix C – Treasury Comments
C-2
C-3
D-1
Appendix D – Report Distribution
Chief Program Officer – U.S. Department of the Treasury
Office of General Counsel – U.S. Department of the Treasury
Chief Financial Officer – Mesa Airlines, Inc.
Inspector General – Special Inspector General for Pandemic Recovery
Asst. Inspector General for Auditing – Special Inspector General for Pandemic Recovery
Office of General Counsel – Special Inspector General for Pandemic RecoveryFile and source
- File
- REPORT_SIGPR_audit-direct-loan-program-recipient-mesa-airlines-inc_2023-09-20.pdf
- Size
- 1,514,769 bytes
- SHA-256
- 1d6da3babe0f5455c04ccf6e8048a6de8b06193a92d0f2e50991006fea83cbd6
- Original
- www.oversight.gov